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Oil cartel OPEC+ is expected to extend current production cuts at a meeting on Thursday as it waits to see how incoming US President Donald Trump imposes oil sanctions on Iran and Venezuela.
The broader OPEC group, led by Saudi Arabia and Russia, is currently holding back nearly 6 million barrels a day, or nearly 6 percent of global supplies, from the market after making a series of production cuts to push prices higher. .
The group announced in June that it would begin gradually lifting its voluntary production cuts of 2.2 million barrels per day from September, while continuing to remove most of its crude oil from the market.
But it has repeatedly postponed injecting more oil into a declining market. Benchmark Brent crude oil prices have fallen more than 9% since just before the June meeting and have been trading in a narrow range in recent months. It rose 0.5% to $73.96 a barrel on Wednesday.
Analysts say the cartel now wants to assess the impact the next U.S. administration will have on global oil supplies before taking action.
“The prudent move would be to continue to watch and wait another quarter,” said Helima Croft, head of global commodities strategy at RBC Capital Markets.
Under current US President Joe Biden, Iranian oil exports, almost all of which go to China, have been allowed to expand. But President Trump has already threatened to impose tariffs on some oil-producing countries and plans to resume his “maximum pressure” policy to bankrupt Iran by trying to cut Iran’s oil exports to zero.
“I think the Trump factor is the big uncertainty,” said Amrita Sen of Energy Aspects. “We don’t know how the tariffs will affect prices, but we’re generally bearish. And at the same time, we don’t know how much effort he’s going to go to against Iran. So both sides. We need to make that clear before we act.”
Jorge León, a former OPEC official now at energy consultancy Rystad, said he expected producer groups “to play it safe and try to extend production cuts.” I heard it will take 2-3 months. ”
On Tuesday, the United States announced it would begin imposing sanctions on certain tankers exporting Iranian crude oil, and oil prices ended the day up about 3%.
One analyst, speaking on condition of anonymity, said Saudi Arabia did not want to appear too eager to fill the gap left if sanctions on Iranian oil were successful. “They will wait until it becomes clear that the market needs oil,” the analyst predicted.
A further delay would give OPEC+ time to monitor whether China’s oil demand recovers as the government seeks to stimulate the country’s economy. It also means decisions can be postponed until the winter maintenance period for refineries, when oil demand tends to drop. “China’s demand is 100 percent important,” the senator said.
Analysts believe the oil market is pricing in further delays in lifting production cuts. However, some members of the OPEC+ group, particularly Iraq, Kazakhstan and the United Arab Emirates (UAE), may be eager to raise basic production quotas after investing in capacity expansion. There is some speculation that there is no such thing.
Those concerns were heightened last week after OPEC+ postponed its meeting for four days due to a scheduling conflict with the Gulf Cooperation Council.
Raad al-Qadiri of the Eurasia Group, who has been monitoring OPEC for many years, said: “Every time OPEC reschedules its meetings, no matter what logical excuses OPEC members come up with, there is internal discord.” “There are growing concerns in the market that this may be the case.” He added that the organization was under pressure to “review” its production policies in light of increased production in these three countries.
Al-Qadiri and Croft said quota compliance will be a continuing theme in oil markets, with investors closely watching whether OPEC+ countries will actually release additional oil. Ta.
The UAE is currently pumping 1 million barrels of oil above its quota, while Iraq is pumping 350,000 barrels a day and Kazakhstan 50,000 barrels a day, according to calculations by Jorge Montepeque, managing director at Onyx Capital. 100,000 barrels more than /day. Daily newsletter about the oil market.
“In fact, in the coming months, the issue may become less about formal statements and formal production policy and more about OPEC discipline,” Eurasia’s Al-Qadiri said.
“If there is less discipline in allocations, it’s exactly the same thing as lessening layoffs; it’s just done more covertly,” he added.