Oil producers in Russia and Saudi Arabia are pushing to extend the Organization of Petroleum Exporting Countries’ (OPEC) production cuts until June of next year, according to a new report by The Wall Street Journal.
The deal, which lowers the bloc’s output by 1.2 million barrels per day, is already set to extend until March 2018.
Saudi Oil Minister Khalid al-Falih and his Russian counterpart Alexander Novak met to discuss the potential extension last month in St. Petersburg. No clear decision has been reached since then, but both parties are rumored to be urging other OPEC members to back extending the cuts yet again.
According to energy and commodities analysts, a three-month extension would be a logical step to take in the autumn when the oil market sentiment would likely sour again. An extension to June 2018 would also prevent a “severe uptick” in surplus after March next year, as Michael Cohen, head of energy commodities analysis for Barclays, told Platts.
According to Joe McMonigle, senior energy policy analyst at Hedgeye Potomac Research, an extension at the November meeting would be the minimum action OPEC would take.
“The market will be looking for stronger action, like deeper cuts,” McMonigle noted.