Despite oil prices sitting at post-2014 highs around $70/barrel, OPEC is aiming to keep production curbs in place. Reuters reports that while no immediate action is being contemplated by the cartel to increase production, the conversation has begun on the sidelines about a possible boost. Alex Lawler and Rania El Gamal write:
OPEC, Russia and several other non-OPEC producers have curbed output since January 2017 to erase a global glut of crude that had built up since 2014. They have extended the pact until the end of 2018, and meet on June 22 to review policy.
The deal has boosted oil prices LCOc1, which topped $71 a barrel this year for the first time since 2014. They were close to $70 on Wednesday. But it has also encouraged a flood of U.S. shale oil, fuelling a debate about how effective the curbs are.
“June will be a rollover until the meeting later in the year to make a decision for next year, depending on market conditions,” an OPEC source from a major Middle East producer said, referring to the supply-cuting deal.
The source said achieving a balance between supply and demand in the second half of 2018 was “the most likely scenario, if production, demand and compliance levels stay as now.”
The chance of a significant tweak to the deal being agreed in June is low, most OPEC delegates say. But some officials are privately talking about the issue, a sign that prices have risen more strongly than expected.
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Jeremy Jones, CFA
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