OPEC and non-member oil producers could deepen output cuts or extend them for a year when they meet in Vienna this week as they seek to clear a global stocks overhang and prop up the price of crude, Kuwait said on Wednesday.
The top oil producer in OPEC, Saudi Arabia, favours extending the output curbs by nine months rather than the initially planned six months, to speed up market rebalancing and prevent crude prices from sliding back below $50 per barrel.
OPEC members Iraq and Algeria as well as top non-OPEC producer Russia also said they support a nine-month extension.
As ministers gathered in Vienna for informal consultations, Saudi OPEC ally Kuwait said discussions included the possibility of deepening the cuts or prolonging them by 12 months.
“All options are on the table,” Kuwaiti oil minister Essam al-Marzouq told reporters.
The Organization of the Petroleum Exporting Countries meets formally in Vienna on Thursday to consider whether to prolong the deal reached in December in which OPEC and 11 non-members agreed to cut output by about 1.8 million barrels per day in the first half of 2017.
On Wednesday, a ministerial monitoring committee consisting of OPEC members Kuwait, Venezuela, Algeria and non-OPEC Russia and Oman meets in the Austrian capital to discuss the progress of cuts and their impact on global oil supply. Saudi Arabia, which holds the current OPEC presidency, will also attend.
Several delegates and ministers including Algeria said they did not believe cuts could be extended to a full year.
Possible surprises could include a deepening of the cuts, but this would likely be minor because the non-OPEC producers that are expected to join the accord for the first time on Thursday, such as Turkmenistan and Egypt, are fairly small.
A more substantial cut was unlikely, one OPEC delegate said, “unless Saudi Arabia initiates it with the biggest contribution and is supported by other Gulf members”.
OPEC’s cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers. By 1029 GMT on Wednesday, Brent crude was up around 0.2 percent at $54.37 a barrel.
But the price rise has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing with global stocks still near record highs.
“This (stocks decline) is a bit tricky as production cuts cause higher prices which will incentivize more production for the U.S. shale oil and reduce the impact of the production cuts. So it’s a bit cyclical,” said Sushant Gupta, research director for consultancy Wood Mackenzie.
Algeria’s energy minister said he believed stocks remained stubbornly large in the first half of 2017 because of high exports from the Middle East to the United States.
“Thankfully, things are improving and we started seeing a draw in inventories in the United States,” Noureddine Boutarfa told Reuters.
One industry source close to OPEC said the group could also send a message about tighter exports but it was unclear how that could be presented on Thursday.
Boutarfa said extending output cuts by nine months would help to ease a global glut by the end of 2017, when inventories should decline to their five-year average: “Before the end of the year, prices may go above $55 a barrel”.