OPEC Could “Relax” Production Cuts

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It was only a few weeks ago that top officials from OPEC nations were issuing statements assuring the market that the group’s production cuts would remain in effect through the end of 2018, with the possibility of even extending them into next year. But now, with the Vienna meeting just a few weeks away, OPEC is suddenly warming up to the idea of lifting the production limits.

The oil market is tighter than it has been in years. OECD oil inventories fell back to the five-year average in March, and because that is the latest month for which data is available, it is safe to assume that inventories are already below that average level. Brent prices have topped $80 per barrel for the first time since 2014 and the outages in Venezuela, Angola, Nigeria and potentially Iran are sending jitters throughout the oil market.

Saudi oil minister Khalid al-Falih had insisted that the higher prices were sentiment-driven, which is to say an exaggerated run up relative to the underlying fundamentals of supply and demand. On multiple occasions, he has repeated OPEC’s determination to keep the cuts in place and sent signals that OPEC and Russia would solidify a long-term arrangement to presumably manage the market…

Read more : Oilprice, 22.05.2018