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OPEC dithers on a meeting date, even with a solid consensus to continue oil cuts

Highlights

Iran proposes new date of July 10-12

Saudi Arabia to keep production steady

Cuts set to expire at end-June

  • Author
  • Staff report
  • Editor
  • Richard Rubin
  • Commodity
  • Oil
  • Topic
  • Oil Price War

London — With less than two weeks before OPEC's production cuts are set to expire, the producer group and its allies appear no closer to choosing when their next meeting will be.

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A rollover of the 1.2 million b/d production cut deal is widely expected -- if OPEC, Russia and nine other partners can agree on a date to decide.

Iran, which had been the lone remaining holdout on moving the meeting from next week, when it was originally scheduled, to July 3-4, surprised many OPEC officials Monday in offering a new proposal: July 10-12.

"I have no problem with July 10-12 if they insist, but I can't do it [from] July 3-7. I have other appointments, plans and obligations," Zanganeh told reporters after talking with Russian energy minister Alexander Novak in Tehran. "I told them I can do later than that, not July 3-4."

Related story: Interview: OPEC 'comfortable' with $60-$70/b oil: Equatorial Guinea

Any date change for the OPEC meeting would require unanimous approval by its 14 members. Several OPEC delegates said news reports of Zanganeh's suggested date were the first they had heard of the proposal.

Novak, who had lobbied for the July 3-4 date to avoid a conflict with the G20 Summit June 28-29 in Tokyo, did not speak to reporters after leaving Tehran for Isfahan, where he will participate in a Russia-Iran bilateral meeting hosted by Iran's power ministry on Tuesday.

Zanganeh said that unless there is a unanimous agreement, the original OPEC meeting date of June 25-26 should be maintained.

"If they want and insist to change the date, I can in two weeks afterwards," he said.

Earlier Monday, Saudi energy minister Khalid al-Falih said that one country, which he did not name, was holding up the date change to July 3-4.

"We hope that they will come along and we will have a date confirmed in the next couple of days," Falih told reporters after the Saudi-Japan Vision 2030 Business Forum in Tokyo. "But I am personally committed to making sure that we do meet and that we have a consensus, which has already been informally developing."

NO SURPRISES WANTED

OPEC and its 10 non-OPEC allies in December agreed to cut 1.2 million b/d for the first half of 2019 to prop up prices and induce draws of oil from storage.

With prices still slumping, many analysts expect the group to extend the cuts, even with Russia suggesting that some quotas should be eased to account for the expected impact of US sanctions on Iran and Venezuela.

Brent crude futures were trading around $61/b Monday, having recovered from briefly dipping to a four-month low below $60/b last week on concerns over the resilience of the global economy to escalating US trade disputes.

Falih has pushed hard for a cut extension and told reporters in Tokyo that he was "absolutely" confident the coalition would reach an agreement, following "very constructive discussions" with Novak earlier this month.

"Our intent is to make sure that we continue to work together closely, not just bilaterally, but with all other members of the OPEC+ coalition -- and that the good work we have done over the last 2 1/2 years continues to the second half of 2019, maintaining supply constraints to bring balance to the global inventories of oil," Falih said.

Saudi Arabia's June and July crude production will be at similar levels as the past few months, Falih said, "to bring inventories back to where they belong." The kingdom pumped 9.70 million b/d in May, according to the latest S&P Global Platts survey of OPEC production.

"I hope that will continue in [H2 2019] with assurances I have received from all the other OPEC+ countries that they will maintain the agreement going into the second half," Falih said.

Equatorial Guinean oil minister Gabriel Mbaga Obiang Lima told Platts that a failure to extend the cuts would be a "big surprise for everybody."

"What we all want is stability; we do not want volatility," he said, adding that OPEC and its allies would be "comfortable" with oil prices in a range of $60-70/b. "We do all believe that it is important to extend the agreement to the end of the year to be able to monitor [the oil market]."

FEELING PINCHED

Last week, OPEC acknowledged that it faces a challenging second half of 2019, with demand-dampening trade disputes combining with expected robust non-OPEC supply growth to hinder the producer bloc's oil market rebalancing efforts.

The International Energy Agency on Friday cut its oil demand growth forecast for 2019 for the second month in a row as "world trade growth has fallen back to its slowest pace since the financial crisis 10 years ago."

But Falih brushed off the demand concerns, saying that the fall in oil prices in recent weeks was based on sentiment, not fundamentals. Fears of growing trade retaliation between the US and China were driving the market, he said.

"From physical demand on oil, I have to say we are not seeing a slowdown from either China, the US, India or other developed economies," Falih said. "The impact so far has been on the sentiment side and fear rather than actual impact."

-- Staff report, newsdesk@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com