OPEC moves towards extending the exit limit when the meeting starts
VIENNA: OPEC and its oil-producing allies changed on Monday to the extension of their daily production caps, which caused oil prices to rise to higher levels before the official meeting of the cartel.
Ministers from the 14-nation Organisation of the Petroleum Exporting Countries ( OPEC ) met in Vienna to discuss output, before gathering a day later for OPEC + -- which is a grouping of 24 oil-producing countries that includes Russia and together accounts for almost half of global crude.
The expanded crude producer club had already decided in December to withdraw 1.2 million barrels per day from the market to boost prices and absorb excess supplies.
Russian President Vladimir Putin and Saudi Arabia agreed on Saturday to extend the agreement between six and nine months, but the move caused dismay in some quarters.
However, the news triggered New York oil prices above $ 60 a barrel, with sentiment also driven by the trade cease between China and the United States agreed at the G20 in Osaka.
All supported the proposal to extend the limits agreed in December for nine months, said the Russian energy minister, Alexander Novak, before the main meeting of the cartel.
Saudi Arabia's energy minister Khalid al-Falih was meanwhile swift to deflect criticism from archfoe Iran that OPEC could "die" in the face of Riyadh and Moscow's Osaka deal.
Falih told reporters before OPEC 's main meeting: "I think OPEC is more vibrant than ever. As Mark Twain said once, the reports of OPEC 's death have been repeated many times, and every time it was ... greatly exaggerated.
We believe that oil as a basic product is unique. It is the blood of the global economy. Ideally, all producers should be around the table with us today.
He added: Saudi Arabia and Russia are the biggest producers, we are making the biggest cuts, we (...) agreed first and then we discussed our agreement with our colleagues from other countries.
Iran had earlier slammed the Osaka move, arguing that OPEC did not simply exist to rubber-stamp a decision made outside of the cartel, but has however voiced its support for the extension.
However, the Islamic Republic, whose production was seriously affected by US sanctions, is exempt from the December cuts agreement, along with the pair affected by the crisis Venezuela and Libya.
United Arab Emirates energy minister Suhail al-Mazrouei predicted that OPEC would agree to the plan amid the brighter post-G20 demand outlook.
In the UAE we see that nine months would be more appropriate and we expect a healthier demand in the second half of the year after the good results of the G20 meeting, said Mazrouei.
Kuwait's oil minister, Khaled Ali Al-Fadhel, agreed, adding: Because of the positive results of the G20 ... we are increasingly confident that things will look better from now on.
OPEC and its oil-producer allies had decided in December to trim output after prices tanked at the end of last year on fears of slower global growth. In reaction the market soared by a third in the first quarter of 2019.
Meanwhile, the cartel remains on red alert due to the escalation of tensions between the United States and Iran that has also driven strong gains in oil prices, particularly the disputed attacks on oil tankers in the Strait of Hormuz.
However, concerns about global demand persist and the cartel has also lost market share to the United States, whose growing shale production has made it the world's largest oil producer.
In afternoon deals on Monday, West Texas Intermediate crude stood at $59.60, up 1.9 per cent, as some analysts cast doubt on whether the OPEC move would lift prices in the long run.
Como tal, el nuevo acuerdo probablemente no abordará el aumento de los suministros no pertenecientes a la OPEC en un momento en que la economía mundial se está desacelerando, lo que podría significar un menor crecimiento de la demanda, dijo a AFP el analista de Forex.com, Fawad Razaqzada.
Therefore, it is likely that the oil market will replenish excessively at the right time, which means that prices may have difficulties to rise significantly from here, he added.