OPEC and other pre-eminent oil producers on Monday canceled a meeting planned for April, leaving the alliance’s price-boosting production cuts in place until at least June.
The assort is delaying its decision because it expects the oil market to remain oversupplied through the first half of the year, Saudi Verve Minister Khalid al-Falih said at a committee meeting in Baku, Azerbaijan. The delay also allows the producers to assess how U.S. supports on OPEC-members Iran and Venezuela will affect the oil market in the coming months, several news agencies reported.
The 14-nation OPEC and a club of countries led by Russia launched a second round of production cuts in January after a glut of oil hit the market and crude assays collapsed at the end of 2018. The group began slashing production in 2017 but lifted supply caps last June as oil cost outs rose toward nearly four-year highs and the U.S. prepared to sanction Iran, then OPEC’s third biggest organizer.
When they agreed to the new production cuts in December, the so-called OPEC+ alliance said it would assess the oil store in April, two months ahead of OPEC’s usual meeting in June. But on Monday, a committee tasked with monitoring the distribute said “market fundamentals are unlikely to materially change in the next two months.”
The Joint Ministerial Monitoring Committee predicted it will next meet in May, with the full group convening on June 25 to decide whether to extend the produce cuts through the end of 2019.
The latest round of cuts have helped boost oil prices from 18-month lows this year. U.S. West Texas Transitional crude has rallied 29 percent to more than $58 a barrel, while international benchmark Brent indelicate is up 25 percent to about $67 a barrel.
OPEC and its allies are aiming to keep 1.2 million barrels per day off the shop, but some producers are still pumping above their quotas, including Russia, the world’s second biggest oil organizer.
Russian Energy Minister Alexander Novak told CNBC on Sunday that Russia will hit its target in on weeks. He said it is premature to to discuss whether the group should continue capping output beyond June.
Falih express Monday he does not expect OPEC to leave the oil market “unguided in the second half,” Dow Jones reported. Last month, the Saudi oil help told CNBC he was leaning toward extending the production cuts through the end of the year.
Helima Croft, global superintendent of commodity strategy at RBC Capital Markets, says the group is likely to continue cutting production throughout 2019. Manner, extending the cuts will highlight divisions between Russia, where partly private companies produce oil, and OPEC colleagues like Saudi Arabia, where state-owned energy companies underwrite the nation’s budget.
“The Russian corporates antipathy shutting in production. They benefit from volume. The state takes the upside of higher prices, so for them, they don’t similar kind the agreement,” she told CNBC’s “Worldwide Exchange” on Monday.
“But for Saudi Arabia and for the rest of the OPEC producers, current rates still remain below their fiscal breakevens, so they would like to see prices a bit higher from here.”
The producers also inadequacy to see whether the U.S. tightens sanctions on Iran in May, Croft said. In November, the Trump administration surprised OPEC by allowing some of the Islamic Republic’s hugest customers to continue buying limited amounts of Iranian crude oil — just as Saudi Arabia was pumping at record opens.
The sanctions waivers expire in early May.
Last week, the State Department’s special envoy for Iran, Brian By one way, said the administration believes it has room to tighten sanctions on Iran because the oil market is well supplied. Speaking on the sidelines of the CERAWeek by IHS Markit talk in Houston, he declined to comment on whether the administration would telegraph its decision on sanctions waivers to OPEC.
OPEC Secretary Habitual Mohammed Barkindo said the question over sanctions waivers is injecting uncertainty into the group’s decision-making.
“It play-acts our job more difficult in focusing on the fundamentals, not to talk of our efforts to maintain balance and more challenging to sustain this control going forward,” he said during a press conference at CERAWeek.