OPEC+ clamping down on members exceeding production quotas

OPEC+ is poised for a debate about lax implementation of oil-production cuts in Vienna this week. Oil jumped above $61 a barrel on last Monday, supported by hints that OPEC. The dollar and global stock markets fell on last Monday after U.S. President Donald Trump’s speech. Russia asking to discuss a rule change that would exclude some of its oil production from the group’s quota. OPEC and other global producers including Russia, a group known as OPEC+ have been cutting output by 1.2 million barrels per day. Brent crude futures were up 35 cents, or 0.6%, at $61.17 a barrel by 0246 GMT. Oil prices rose on Wednesday in advance of a meeting of OPEC and its allies discusses. Riyadh wants high prices to help Aramco IPO -sources.

Ministers from some of the world’s largest oil producers are gathering this week. API data on U.S. crude stocks at 2130 GMT (Updates prices, market activity). Russia yet to finalise position for OPEC+ meeting Novak. Typically the discussions wouldn’t focus on a niche hydrocarbon called condensate. The Organization of the Petroleum Exporting Countries and allies including Russia are expected to extend output cuts this week. The group will meet in Vienna this week and may potentially deepen the cuts by 400,000 bpd. U.S. West Texas Intermediate (WTI) crude futures were up by 31 cents, or 0.6%, at $56.41. Yet as Saudi Arabia signals impatience with fellow members who aren’t implementing their pledged curbs.

“In general, I think we have a good level of compliance”, Novak told reporters.

Brent crude futures were up 28 cents, or 0.5%, at $61.10 a barrel by 0151 GMT. JP Morgan expects deeper cuts, Goldman sees roll-over (Updates with Iraq). Russia’s rebuttal may focus on the accounting method for this light oil that’s a byproduct of natural gas fields. JPMorgan expects deeper oil production cuts until end of 2020 (Adds JPMorgan, updates prices). OPEC and its allies led by Russia are gearing up to approve deeper oil production cuts this week. Underlying the discussions in the Austrian capital on Dec. 5 to 6 will be a disparity at the heart of the alliance between the Organization of Petroleum. There is a discussion about a deeper cut taking place. Oil prices rose on Wednesday ahead of a meeting of OPEC and its allies to discuss whether to extend production curbs.

Since the coalition came together in late 2016, Saudi Arabia has consistently led by example by cutting deeper than required. U.S. West Texas Intermediate (WTI) crude futures were up by 27 cents, or 0.5%, at $56.37. Oil steadied on Tuesday, as expectations of output cuts from OPEC and allied producers brought prices back up. Oil prices slipped on last Tuesday after U.S. President Donald Trump said a trade deal with China could be delayed. The other nations such as Iraq, Kazakhstan and Nigeria have made only sporadic efforts to comply. Brent futures fell 42 cents to $60.50 a barrel by 1448 GMT. U.S. Brent crude futures gained 17 cents to $61.09 a barrel by 1:14 p.m. EST (1814 GMT).

In particular Russia, joint architect of the OPEC+ alliance and its largest producer, has consistently pumped too much. Already large speculative buying in recent weeks and some expectations for a longer/longer cut suggest. Non-OPEC Russia also said it was expecting a constructive meeting. Trump said a U.S.-China trade agreement might have to wait until after next November’s presidential election. Company achieving its target in just three months this year when chemical contamination shut down a major pipeline. West Texas Intermediate (WTI) crude was down 25 cents at $55.71. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+. Energy Minister Alexander Novak has offered several explanations for his country’s poor compliance.

European shares posted their biggest daily drop in two months as the threat of tariffs overshadowed. Brent crude futures were up 35 cents, or 0.6%, at $61.17 a barrel by 0246 GMT. The Organization of the Petroleum Exporting Countries (OPEC) and allies that include Russia – a group known as OPEC+. The Organization of the Petroleum Exporting Countries (OPEC) meets on last Thursday in Vienna. Most recently blaming it on the startup of new natural gas fields that added more condensate into Russia’s oil mix. A deeper cut is being preferred by a number of key members within OPEC. Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the initial public offering of state-owned Saudi Aramco.

Therefore expect Brent to continue trading around $60 per barrel in 2020. OPEC+ has been curtailing output since 2017 to counter oversupply as a result of booming output in the United States. A senior official at the International Energy Agency (IEA) said on Tuesday that OPEC producers are unlikely to agree. Saudi Arabia is pushing the plan to deliver a positive surprise to the market. It given that statistics include condensate output that has risen significantly. Russian Energy Minister Alexander Novak said Moscow had yet to finalise its position. Goldman Sachs on last Monday said that OPEC+ is likely to extend output curbs through June. Excluding the increase in condensate production, Russia would be cutting in line with its target of 225,000 to 230,000 barrels a day.

Investors worried it would only be a matter of time before Trump targets Europe again. The global oil supply demand balance requires an extension of the current OPEC+. The Organization of the Petroleum Exporting Countries (OPEC) and allies that include Russia — a group known as OPEC+. There is still some scepticism in the market over whether OPEC will cut output further. A source familiar with the Russian thinking told Reuters that Moscow would “most likely”. JPMorgan said in a note on Tuesday that it expects OPEC+ to agree to deepen the production cut to 1.5 million bpd. Condensates are excluded from OPEC production numbers. Producers must decide to continue, trim, deepen or dump their agreement.

It’s dating back to the days when the cartel’s production quotas were first established. A sticking point for Russia this time is how its output is being measured it includes gas condensate in its figures. OPEC ministers meet in Vienna on last Thursday and the broader OPEC+ group gathers on Friday. Company developed a formula to determine what was counted as crude oil. U.S. producers have been happy to meet any market shortfalls with record-setting output. So excluding them would bring Russia into line with the rest of the group. The factors behind this view included a large increase in production from legacy non-OPEC projects. There is a big stock build in the first half of the year.

However, it would also complicate what may already be tricky discussions about the outlook for the market in 2020. The so-called OPEC+ group has coordinated output for three years to balance the market and support prices. The possible extension of the current output curbs beyond their end-March expiry. The extension is necessary to offset the 1.3 million bpd global surplus expected in the second quarter. Excluding Russian condensates would also affect the October 2018 production baseline for the country’s output reduction. Company will discuss with our colleagues to take account of our statistics the same way. U.S. crude oil inventories likely declined by 1.8 million barrels last week.

Other non-OPEC countries may also request the same treatment, notably Kazakhstan. There is still some skepticism in the market over whether OPEC will cut output further. The liquids production from the huge Karachaganak project is mostly condensate. The investment bank said it expects Brent to trade around $60 a barrel in 2020 in the absence of geopolitical shocks. Ongoing concerns over the global economy and the U.S.-China trade war continue to weigh on prices. Gas condensate accounted for about 6% of Russia’s total oil output last year, according to VTB Capital. Rosneft PJSC, Gazprom Neft PJSC. Oil prices rose on last Tuesday on expectations for OPEC+ to enact the deeper cuts for a longer period.

Bjarne Schieldrop, chief commodities analyst says “The OPEC+ meeting could be contentious and there aren’t many reasons to be optimistic for a bullish outcome”.

The current deal to cut supply by 1.2 million bpd started in January. Novatek PJSC would be the biggest beneficiaries if the hydrocarbon was excluded from the country’s quota. OPEC ministers meet in Vienna on Thursday and the broader OPEC+ group gathers on Friday. OPEC is fighting it out in Vienna this week. OPEC may cut output, U.S. producers have been only too happy to meet any market shortfalls. The dollar posted its biggest slide against the euro since mid-September. Free-riding on Saudi Arabia is not an option for the next six months. OPEC could announce an extension to supply cuts to cover the whole of 2020. It’s a chilling message to both markets and to OPEC+.

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