Oil market re-balance happening? OPEC planning next six-month extension of oil output CUTS ?

Chronology of decisions:

Firstly, On February 7, 2017, Iran’s oil minister announced that major oil producers should prolong the oil production cut deal in second half of 2017. The production cut would restrain oversupply in the oil market and support crude oil prices. Higher crude oil prices have a positive impact on oil and gas producers. It affects their earnings: like Marathon Oil (MRO), Warren Resources (WRES), Hess (HES), and PDC Energy (PDCE).

Saudi Arabia and major oil producers output cut plans

In January 2017, Saudi Arabia’s energy minister said that OPEC might not extend the production cut deal beyond six months. He thinks that the oil market’s re-balance will end by first half of 2017.

If there’s a delay in the re-balance, we might see production cuts continue for another six months. Changes in supply and demand impact crude oil prices.

The U.S.: Bank of America Merrill Lynch thinks that President Trump’s energy policies would increase supplies in the US. Following, the supply would increase in the global oil market too, which would lead to oversupply in 2018. Resulting with pressured crude oil prices in 2018.

NEW Info on extended oil output cuts

An OPEC and non-OPEC technical committee recommended that producers extend a global deal to cut oil supplies for another six months from June in an effort to clear a glut of crude that has weighed on prices.

For example, OPEC, Russia, and other producers primarily agreed to cut oil production by 1.8 million barrels per day (bpd) for six months from Jan. 1 to back up the market.

Accordance on this matter also came at the meeting in Vienna, on Friday. Officials from important monitoring countries showed devotion to agree on output levels. Those were Kuwait, Algeria, Venezuela. And non-OPEC countries like Oman and Russia.

Reuters sources said the rate in March represented an increase from February’s level. Overall compliance with pledged cutbacks stood at 98 percent in March.

Oil prices still declined on Friday, with Brent crude trading below $52 a barrel. (Reuters)

The problem here is increasing U.S. production. It is causing big supplies, which seriously are affecting the efforts by OPEC and other non-OPEC allies to curb outputs.

Kuwait and Saudi Arabia Oil ministers, gave a clear signal on Thursday (March the 20^th) that their producers plan to prolong the accord. Being aware of this, board’s recommendation that the supply cuts be prolonged, didn’t come as a surprise.

OPEC ministers plus their non-OPEC counterparts are scheduled to meet on May 25.

Meeting in Vienna

Russian Energy Minister Alexander Novak said after Friday’s meeting in Vienna: “The decision on extending the pact has not yet been taken, but it would be discussed with OPEC on MAY 24.^th”

The panel, which met at OPEC’s Vienna headquarters, is the Joint Technical Committee (JTC) established in January to monitor adherence to supply cuts. Top OPEC producer Saudi Arabia is also a member of the JTC in its capacity as 2017 OPEC president. (Reuters)

As we announced many times before, OPEC ministers and their non-OPEC allies are to meet on May 25^th, to discuss all the important opinions and ideas on this matter.

The Friday’s meeting also discussed OPEC’s own permissiveness, which it put at 103 percent. Much in line with ratings published in OPEC’s most recent monthly report.

In conclusion, there is about one month left till the May 25^th. It will be a very important meeting, when some of the speculations about cutting oil outputs will come true. Whether glut would recover itself or it would be gone, we will witness it really soon. And the global oil market will certainly take a bit different dimensions after this date.