VIENNA: Oil producers within and outside Opec are expected to extend a deal cutting output aimed at lifting the price of crude, but US rivals could spoil the party.
Last November members of the Organization of the Petroleum Exporting Countries agreed to cut production by 1.2 million barrels per day (bpd).
The following month several nations outside the cartel, notably Russia, agreed with Opec to reduce their production by 600,000 bpd.
The aim was to reduce a huge global supply glut that had pushed down the price of oil from over $100 per barrel in 2014 to close to $25 in early 2016.
While welcome news to firms and to consumers filling up their cars, this blew a hole in the finances of oil-producing nations, even rich Gulf countries.
It exacerbated the crisis in Venezuela, where inflation is triple digit, bankruptcy looms and where weeks of violence have killed some 50 people.
Since December Brent crude, the global benchmark, has recovered to more than $54 per barrel from about $46, although it has dipped below $50 several times.
The pact was also a dramatic policy turnaround for Opec that even had regional arch rivals Saudi Arabia and Iran see eye to eye.
Iran, free to export crude again following the lifting of nuclear-related sanctions in early 2016, was even allowed to continue raising its production. The deal was due to expire on June 30, but data showed that the global glut still remains.
Last week Saudi Arabia and non-Opec Russia, the biggest of the 24 producers involved — and who also are anything but best friends — backed an extension until April 2018.
On Wednesday a joint committee of six Opec members and non-Opec nations recommended such an extension.
Thursday’s meeting in Vienna was expected to sign off on this.
However Opec and the other producers run the risk of being victims of their own success because of shale oil producers in the United States, which are not part of the accord.
Before, Opec’s strategy was to keep pumping at full tilt in order to push the oil price lower and make life difficult for the Americans, who need a higher price to make money. When the oil price was at its nadir in 2016, scores of US firms went bankrupt.
But with the recent rise, many have returned to the market — with a vengeance.
US production has risen 850,000 bpd from its 2016 lows to 9.3 million bpd now, not far from the all-time record set in 2015.
Valentin Bissat at Mirabaud Asset Management said that this shows that Opec “has lost some its ability to fix (oil) prices”. — AFP
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