Saudi Arabia and the UAE have remained silent over Iraq’s proposal to deepen OPEC+ production cuts, leaving the market to speculate about the group’s plans before crucial talks in Vienna this week, reported Bloomberg.
Iraq, which has the worst record among major producers of implementing the group’s current supply deal, is nevertheless pushing for steeper cutbacks. Oil Minister Thamir Ghadhban said that the group should remove another 400,000 barrels a day from the market, taking the total reduction to 1.6 million.
Ghadhban added that he believed Saudi Arabia, OPEC’s defacto leader, also supported the move.
The Kingdom’s Energy Minister Prince Abdulaziz bin Salman declined to answer specific questions, saying simply that the market outlook was ‘sunny’ like the weather.
Contrary signals had emerged from the meeting of the group’s Joint Technical Committee, which advises ministers but doesn’t make final decisions. Officials present at the talks did not discuss steeper cutbacks.
The group’s main aim is to agree an extension of the existing deal beyond March 2020, for which there is a consensus among the Arabian Gulf allies, said Mohammed Al Rumhi, Oman’s Oil Minister. The UAE Energy Minister Suhail Al Mazrouei would not confirm which proposals will be discussed on 5 and 6 December 2019, while Kuwait’s Oil Minister Khaled Al-Fadhel said he had not heard a suggestion for an additional cut of 400,000 barrels a day.
The agreement expires at the end of March 2020 and ministers must decide what to do next. In 2020 the group faces slowing demand growth and another huge expansion in rival production, which together could create another oversupply that drives international prices back down toward $50 a barrel.
“It has been calculated that the 1.2 million has proved not enough so an additional cut is required because demand growth is slowing, this is not yet final, it’s very much subject to member countries,” said Ghadhban.
In reality, OPEC+ has already gone deeper than the pledged 1.2 million cut due to a combination of voluntary and involuntary measures. The JTC concluded that the group exceeded that target by about 40 per cent in October 2019, meaning the additional cuts Iraq is proposing are in place, albeit unofficially.