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OPEC+ could extend oil cuts, formal talks yet to start, sources say

Published 05/02/2024, 07:17 AM
Updated 05/02/2024, 07:39 AM
© Reuters. FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo

By Alex Lawler and Olesya Astakhova

LONDON/MOSCOW (Reuters) - OPEC and its allies have yet to begin formal talks on extending voluntary oil output cuts of 2.2 million barrels per day beyond June, but three sources from OPEC+ producers said they could keep their cuts if demand fails to pick up.

OPEC+ has implemented a series of output cuts since late 2022 amid rising output from the United States and other non-member producers, and worries over demand as major economies grapple with high interest rates.

OPEC+, which includes the Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers, next meets on June 1 in Vienna to set output policy. OPEC did not respond to a request for comment.

The OPEC+ group is currently cutting output by 5.86 million bpd, equal to about 5.7% of global demand. The cuts include 3.66 million bpd by OPEC+ members valid through to the end of 2024, and 2.2 million bpd of voluntary cuts by some members expiring at the end of June.

Oil prices have found support this year from the conflict in the Middle East, although concern about economic growth and high interest rates has weighed. Brent crude hit a seven-week low on Wednesday and settled at $83.44 a barrel.

The three sources from countries which have made voluntary supply cuts said an extension was likely.

The cuts could be extended until year-end, said one source, while another said it would take a surprise jump in demand for OPEC+ to make any changes.

Two other OPEC+ sources said formal talks had yet to take place, and one of those said OPEC+ was not yet leaning one way or the other on extending cuts.

The countries which have made voluntary cuts that are deeper than those agreed with the wider group are Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia and the United Arab Emirates.

"We think there's a good chance that OPEC+ will extend beyond June - but we aren't yet putting a firm view because we don't think they've actually got into the real period of discussion and decision-making," said Richard Bronze of Energy Aspects.

© Reuters. FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo

Another option would be for some or all of the 2.2 million bpd of cuts to be unwound after June, analysts say.

OPEC has said it expects another year of relatively strong oil demand growth of 2.25 million bpd, while the International Energy Agency expects much slower growth of 1.2 million bpd.

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