OPEC and the allies agree to agree on the extension of the oil cut until the end of 2018



VIENNA (Reuters) – OPEC and OPEC oil producers appear willing to agree at a meeting on Thursday to extend production cuts until the end of 2018, said four OPEC sources as the group seeks to clear a global excess oil and avoid another price collapse.

A man arranges a poster with the OPEC logo next to the entrance to his headquarters before a meeting of OPEC oil ministers in Vienna, Austria, on November 29, 2017. REUTERS / Heinz-Peter Bader

A last-minute debate was still possible in the language of an expected statement, with Russia not belonging to OPEC pressing for a clear message on how to get out of the cuts to prevent the market from overheating by turning too soon.

The current agreement of the producers, according to which they are reducing the supply by approximately 1.8 million barrels per day (bpd) in an effort to boost oil prices, expires in March.

"They will agree on the nine months," said one OPEC delegate, adding that a meeting of the Organization of Petroleum Exporting Countries, which will begin around 0900 GMT, is expected to be fluid.

A second source said: "There are no surprises … they are all for nine months."

Two other sources made similar comments. The OPEC meeting will be followed by a meeting of OPEC and non-OPEC producers led by Russia at around 1400 GMT.

The 14 members of OPEC and Russia have indicated that they can review any extension of the agreement when they meet in June if the market overheats.

With oil prices LCOc1 rising to more than $ 60 per barrel, Russia has expressed concern that such an extension could lead to an increase in crude production in the United States, which is not participating in the agreement.

Russia needs much lower oil prices to balance its budget than the OPEC leader, Saudi Arabia, which is preparing a stock price for national energy champion Aramco next year and, therefore, would benefit from a more expensive crude.

"The prices will be well backed in December with a big global stock draw, the market could surprise on the rise even with $ 70 per barrel for Brent, which is not out of the question if there is an unexpected interruption in the supply" said Gary Ross, a veteran OPEC observer and founder of the Pira consultancy.

Three sources familiar with the OPEC talks said the group could also discuss Nigerian and Libyan production at 1.8 million bpd and 1 million bpd respectively, having exempted the two countries so far due to riots and lower than normal production.

Production cuts have been in effect since the beginning of 2017 and helped halve an excess of world oil stocks, although those remain at 140 million barrels above the five-year average, according to OPEC.

Russia has indicated that it wants to better understand how producers will come out of the cuts, as it needs to provide guidance to its private and state energy companies.

"It is important … to elaborate a strategy that we will follow from April 2018," Russian Energy Minister Alexander Novak said on Wednesday.

Additional reporting by Shadia Nasralla, Ernest Scheyder, Ahmad Ghaddar and Vladimir Soldatkin; Written by Dmitry Zhdannikov; Edition by Dale Hudson

Our standards: The principles of trust of Thomson Reuters.

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