Voice of America
05 Dec 2019, 01:05 GMT+10
The world may be heading for an even greater oversupply of oil, and that possibility - which could drive down fuel and energy prices - is hanging over members of the OPEC cartel as they head into negotiations Thursday.
The oil-producing nations will decide whether to stick with production cuts they've endured for the past three years, relax them or deepen them in the hopes of propping up prices.
They're negotiating through a tangle of tensions driving members in competing directions.
Saudi Aramco's stock market debut, which will get off the ground Thursday when the state-run oil giant prices its shares, has put Saudi Arabia in a precarious position as it bets on what volume of oil production will hit a sweet spot for prices, with the added pressure of considering the interests of its shareholders. The nation is already bearing the burden of the largest share of OPEC's production cuts.
But some nations such as Iraq have been ignoring the agreement and producing more than their allotted amount.
"If people are already not complying to the current agreement, what's the point to those that are complying cutting more? So the others can go on cheating?" said Bhushan Bahree, executive director of global oil at research group IHS Markit. "I think the Saudi position is they're willing to cut more if needed, but they want better compliance."
Production cuts
Brent crude oil hovered around $61 per barrel Wednesday afternoon. Prices have fluctuated throughout the year, reaching nearly $75 per barrel in April after U.S. sanctions on Iran and Venezuela limited world supply, but lingering trade tensions between the U.S. and China dampened economic expectations, pushing prices back down.
West Texas Intermediate, the U.S. benchmark crude, was trading at around $56 Wednesday afternoon, and its price followed a similar trajectory throughout the year.
As it stands, OPEC nations have agreed to cut production by 1.2 million barrels per day through March 2020, and most analysts expect OPEC nations to extend those production cuts until at least summer.
"If they just keep the existing situation, then you get this massive oversupply," said Jacques Rousseau, managing director at Clearview Energy Partners.
Rousseau believes OPEC nations will cut production by an additional 400,000 barrels per day to keep supply and demand in balance during the first half of next year, with the cuts made mainly by Kuwait, Saudi Arabia and the United Arab Emirates. But substantial cuts may be difficult to achieve with some OPEC members following their own agendas.
"Iraq has exceeded its production target every month this year," Rousseau said. "Granted, there's some unrest going on in the country, but I don't think they'll voluntarily reduce."
Russia
Meanwhile, Russia, which is not part of OPEC but has been following its lead on production limits in recent years, has indicated it wants its oil production re-calculated in a way that's in line with OPEC nations. That could enable it to produce more oil.
And even if members of the cartel cut production, there's more oil coming online from non-OPEC nations including the U.S., Canada, Brazil, Norway and Guyana, which will more than make up for any drop in production, according to IHS Markit.
The dynamic to watch will be whether Russia and Saudi Arabia will come to an agreement on production levels in the early and middle parts of next year, said Heather Heldman, managing partner at Luminae Group, a geopolitical intelligence firm.
"If something goes awry with Saudi production in the next few months, and there's a fairly good chance something will happen ... Russia's going to be the first party looking to fill that gap," Heldman said. "And I think the Saudis know that."
Get a daily dose of Broadcast Communications news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Broadcast Communications.
More InformationNEW YORK, New York - Global stock indices closed with divergent performances on Tuesday, as investors weighed corporate earnings, central...
TORONTO, Canada: Canadian Prime Minister Mark Carney announced late on June 29 that trade negotiations with the U.S. have recommenced...
Vancouver, Canada: A high-stakes legal showdown is brewing in the world of athleisure. Lululemon, the Canadian brand known for its...
LONDON, U.K.: British oil giant Shell has denied reports that it is in talks to acquire rival oil company BP. The Wall Street Journal...
NEW YORK, New York - U.S. stock markets closed firmly in positive territory to start the week Monday, with the S&P 500 and Dow Jones...
WASHINGTON, D.C.: On Friday, President Donald Trump announced that he was halting trade discussions with Canada due to its decision...
SHARJAH, 7th May, 2025 (WAM) -- The Sharjah Broadcasting Authority (SBA) recently took part in the 76th World News Media Congress,...
New Delhi [India], July 1 (ANI): On the occasion of the approval of the new 'Khelo Bharat Niti 2025', Prime Minister Narendra Modi...
Mumbai (Maharashtra) [India], July 1 (ANI): The Indian Institute of Creative Technologies (IICT) opens admissions for its first batch...
New Delhi [India], July 1 (ANI): In a significant step to bolster India's research and innovation ecosystem, the Union Cabinet on Tuesday...
Welcome to Wider Europe, RFE/RL's newsletter focusing on the key issues concerning the European Union, NATO, and other institutions...
Dehradun (Uttarakhand) [India], June 30 (ANI): Uttarakhand Chief Minister Pushkar Singh Dhami on Monday participated in the Space Technology...