OPEC to extend oil production curbs as meeting starts in Vienna

Ahead of a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies in Vienna, the most important oil producers there are indicating there is likely to be an extension of a plan to curb oil production.

Speaking to reporters in the Austrian capital on Sunday, United Arab Emirates Minister of Energy and Industry Suhail al-Mazrouei said an extension of a deal originally struck in December last year — which called for an output cut of 1.2 million barrels per day — would likely be necessary.

“The current condition of the market, in my view, would require an extension,” al-Mazrouei said.

“I said that earlier when we were in … Jeddah for the” Joint Ministerial Monitoring Committee, he said, in reference to his comments from May that the job of OPEC and its allies to balance the oil markets was still incomplete. “We looked at the numbers. I don’t think they have changed much … since that time.”

Al-Mazrouei’s comments came after Russian President Vladimir Putin announced over the weekend that Russia reached an agreement with Saudi Arabia to extend the oil output deal by six to nine months.

“We will support the extension, both Russia and Saudi Arabia,” said Putin, who met Saudi Crown Prince Mohammed bin Salman at a Group of 20 (G-20) summit in Japan. “As far as the length of the extension is concerned, we have yet to decide whether it will be six or nine months. Maybe it will be nine months.”

Saudi Energy Minister Khalid al-Falih said Sunday that the deal would most likely be prolonged for nine months and no deeper cuts were required.

Asked about the deal extension potentially being decided at the G-20 summit instead of the meeting of OPEC and its allies, al-Mazrouei said: “OPEC is … an organization that each country can veto a decision, that’s why … every vote counts.”

OPEC members are set to meet on July 1 in Vienna, followed by a meeting that will include non-OPEC states, such as Russia, on July 2.

Oil prices rose sharply in the afternoon of Asian trading hours on Monday, with international benchmark Brent crude futures adding 2.58 percent to $66.41 per barrel. U.S. crude futures jumped 2.46 percent to $59.91 per barrel.

Iran says it wants unity

Meanwhile, OPEC member Iran called for unity among members of the cartel.

“Iran supports cooperation with non-OPEC states, but as long as some members of OPEC are hostile against other members, like Iran, OPEC’s understandings with non-OPEC states are meaningless and there is no room for cooperation,” Iran’s Oil Minister Bijan Zanganeh said in a report by Shana, the country’s oil ministry news service.

Tehran has in the past objected to policies put forward by its regional arch-rival Saudi Arabia, claiming Riyadh is too close to Washington.

With its economy crippled by sanctions imposed by the U.S., tensions between Tehran and Washington have risen in recent weeks after Iran shot down an American drone.

One analyst, however, said there may be little that Iran can do except wait it out until another U.S. administration comes along.

“Iran’s game is try and keep as many friends as it can in Europe, and if it creates a military incident or a blockage on supply, it will lose those European friends very quickly,” Richard Martin, managing director at IMA Asia, a forum for business executives in Asia, told CNBC’s “Squawk Box” on Monday.

“I think the best Iran can do is wait for another president in the United States because for (Donald) Trump, Iran is the perfect flag to wave to his base in the U.S. voting public, that’s what it is for him, ” Martin said. “So, he can just keep the pressure on them as long as he likes. There’s no pressure on Trump to do a deal here at any point.”

Source: CNBC