OPEC+ is considering increasing production in the second half of 2019, as the oil market tightens following a series of major outages.
OPEC+ met in Jeddah over the weekend to assess the state of the oil market and discuss the group’s plans for the rest of the year. The technical meeting comes ahead of the highly-anticipated June meeting in Vienna, where the coalition is expected to finalize its plans.
In Jeddah, however, OPEC and its partners examined a few scenarios. Saudi Arabia and others within OPEC reportedly want to keep the cuts in place while Russia is more eager to loosen the curtailments.
According to Reuters, Saudi Arabia and Russia are mulling two options, both of which consist of higher output. The first option would consist of reducing the agreed upon cuts of 1.2 million barrels per day (mb/d) to just 0.9 mb/d going forward.
The second option would call for ending over-compliance with the 1.2-mb/d curtailment. Saudi Arabia’s deeper than required cuts and the (involuntary) outages in Iran and Venezuela would be compensated for with more barrels from elsewhere. This plan would roughly translate into a production increase of 0.8 mb/d.
But while the second option could lead to more supply on the market, it would still officially maintain the 1.2-mb/d level, which OPEC is loath to change. Top officials from the Gulf States have balked at the proposal to lower the headline cut from 1.2 to 0.9 mb/d. “I don’t think easing the cuts is a good option,” said Emirati energy minister Suhail al-Mazroui, according to the Wall Street Journal. They’d rather just bring over-compliance back into alignment.