OPEC+ reportedly considers early meeting this week to discuss possibility of extending oil production cuts up until end of the year
- OPEC+ may reportedly meet this week to discuss extending oil production cuts by an extra one to three months.
- Reuters said the earlier meeting was at the request of Algeria who reportedly said this was to facilitate crude sales for Iraq, Kuwait and Saudi Arabia, Reuters reported.
- OPEC announced a production cut of 9.7 million barrels a day in April, due to take effect over May and June.
- West Texas Intermediate oil prices turned negative briefly last month but, along with Brent have recovered since.
- Track the price of oil live on Markets Insider.
The OPEC+ could reportedly meet as soon as Thursday to discuss the possibility of keeping oil production cuts in place up until the end of the year, Reuters reported citing three sources.
The production cuts, previously meant to be easing in July is the latest sign that more action is needed to shore up demand for the battered commodity.
Three confidential sources, who were not authorized to speak publicly, told Reuters that the OPEC+ may bring forward a meeting initially scheduled for June 9-10 to as early as this Thursday.
This was reportedly at the request of Algeria, who holds the rotating presidency of the OPEC, according to a letter seen by Reuters.
One delegate told Bloomberg that production cuts could be in place by an extra one to three months instead of tapering them from July 1.
Algeria reportedly said this was to facilitate crude sales for Iraq, Kuwait and Saudi Arabia, with Russia also endorsing the earlier meeting.
The OPEC announced in April it would be cutting oil production by 9.7 million barrels over the course of May and June with the production cut due to be initially eased off in July.
Last month, Saudi Arabia's state giant Saudi-Aramco announced it would cut production by an additional 1 million barrels per day. From June, Saudi Arabia's production will be about 7.5 million barrels per day, roughly 4.8 million barrels per day lower than its April output.
But the earlier meeting could pave the way for the production cut to be in place until the end of the year.
Neil Wilson, chief market analyst at Markets.com, said: "This may suggest an energy and enthusiasm to get a deal on maintaining deeper cuts for longer. July is currently set to see a gradual tapering of cuts down from 9.7m bpd in May and June, but there has been a lot of chatter that Saudi Arabia is trying to bring Russia around to backing an extension to make the deeper cuts last longer – perhaps for the rest of 2020."
Naeem Aslam, chief market analyst at Avatrade said: "It was the current oil production cuts that helped the oil prices to recover from their 2020's oil price crash. The current proposal is to extend the production by at least one month and a maximum of three months."
He added: "If agreed, the move can further strengthen the WTI crude oil price and Brent oil prices. The WTI crude oil price has already jumped above $35 but down today by a small percentage. The Brent price has surged to $37 but again, it is down by 0.21%"
But Jeffrey Halley, senior market analyst, Asia-Pacific at Oanda, struck a less optimistic tone. "If group production discipline is maintained, then oil should negotiate this without incident. However, if disagreements break out between Saudi Arabia and Russia over production targets, the oil rally could grind to a halt."
A bitter oil price war between Saudi Arabia and Russia in March set the oil price tumbling in March and led to the OPEC to consider production cuts to shore up the price of the commodity which had been hit by the coronavirus pandemic.
US prices turned negative for the first time in history in April but they have recovered since.
US marker West Texas Intermediate is trading at $35.40 a barrel, 0.2% lower and the global benchmark Brent is up 0.8% just above $38 barrel, as of 8:00 a.m. ET.
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