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OPEC Likely to Stick to Output Cuts for Another Month
OPEC will likely remain committed to production curbs for yet another month, the energy minister of Azerbaijan told Reuters ahead of the group’s Sunday meeting.
“OPEC+ could or couldn’t discuss oil output rollover at its next meeting. It is difficult to prejudge,” Parviz Shahbazov told the publication.
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OPEC has been under pressure from the market to stick to its production cuts because of depressed prices, with any decision to reverse any part of the cuts seen as extra-bearish for the commodity. Indeed, even news reports about the possibility of a rollback have pressured prices substantially, even if the reports were not followed by the respective OPEC decision.
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The producer group was supposed to bring back some 180,000 barrels daily in supply from December but it had conditioned that move on the price environment. If oil prices were right, they would bring back the supply. If prices remained depressed, as they have, the return of output would be pushed back—and it was.
There has been speculation that not all OPEC—and OPEC+—members are happy with the current policy, which seems to be cementing the output cuts as permanent, or at least longer-term than initially expected. Indeed, some OPEC nations heavily dependent on oil revenues have been in favor of a rollback, seeking to compensate for lower prices with higher sales volumes.
Meanwhile, oil demand keeps surprising to the upside, BP’s chief executive said this week, which suggests a brighter future for oil producers may be on the horizon when traders acknowledge the demand reality. Meanwhile, analysts continue talking about “weak demand”, per a recent Reuters report, which said OPEC+ would likely roll over its cuts to the first quarter of 2025.
“I can’t say it’s popular in the group but there would be no strong objection to a delay until the first quarter,” one source from the extended group told Reuters last week.
By Irina Slav for Oilprice.com
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