OPEC output cuts likely next year

A return to oil production cuts by the Organisation of Oil Exporting Countries (OPEC) and its allies cannot be ruled out next year, a senior OPEC source said yesterday.

The move, the source explained, is to avert a possible supply glut that could weigh on prices.

The hint came on a day that oil rebounded to $73 a barrel after falling to its lowest since August.

The OPEC source was responding to a report by Russia’s TASS news agency that Russia and Saudi Arabia had started bilateral discussions over possible curbs to output in 2019.

Saudi-led oil cartel and its allies, including Russia, decided in June to relax output curbs in place since 2017, after pressure from United States (U.S.) President Donald Trump to reduce oil prices and make up for supply losses from Iran.

When asked whether discussions pointed to a return to supply cuts in 2019, a second delegate from OPEC said: “certainly not the other way around.”

Oil prices have come under downward pressure from rising supplies, even though Iranian exports are expected to fall because of new U.S. sanctions.

Forecasts of a 2019 supply surplus and slowing demand have also dented the market.

Brent crude LCOc1 had dropped from a four-year high in October above $86 a barrel to $71.18 dollars on Tuesday, its lowest since August 16. The U.S. crude CLc1 rose 58 cents to $62.79.

While Iranian oil exports are expected to fall because of U.S. sanctions that took effect on October 5, reports from OPEC and other forecasters have indicated that the global market could see a 2019 supply surplus as demand slows.

But prices rallied back above $73.04 dollars yesterday, the TASS report said.

A ministerial committee of some OPEC members and allies will on Sunday meet in Abu Dhabi to discuss the market and outlook for 2019.

The group, known as the JMMC, could make a recommendation on 2019 output policy to the next decision-making meeting of OPEC and non-OPEC oil ministers, a third OPEC source said. That meeting is billed for December 6 and Dec 7 in Vienna.

“Any serious discussion will be toward the December meeting,” the third source said.