OPEC ministers met late into the night at their Vienna headquarters on Thursday as they grappled with the prospect of a wave of extra barrels from rival producers expected to hit the market next year.
The oil exporters’ club is expected to agree deeper cuts to keep a floor under prices, but details have yet to be decided and OPEC ministers have another crucial meeting with allied countries scheduled for Friday.
OPEC spokesman Hasan Hafidh told journalists that ministers continued their deliberations just before 10pm Vienna time and that the press conference scheduled for Thursday was cancelled.
OPEC and allied oil exporters have officially maintained an agreement to reduce exports by 1.2 million barrels per day for almost three years, but compliance has been patchy, with Saudi Arabia taking a highly disciplined approach, but notable exceptions in Iraq, Nigeria and Russia, which are all pumping above their quotas.
Earlier in the day, the Joint Ministerial Monitoring Committee recommended that OPEC and friends remove another 500,000 barrels per day from the market, according to Russia’s Energy Minister Aleksander Novak. But this has yet to be endorsed by OPEC ministers, let alone the allied producers.
“I think compliance issues and distribution of the cuts will be the issues under discussion,” said Yousef Alshammari, CEO of CMarkits, a London-based oil consultancy.
North Sea Brent crude oil futures held at around $63.21 per barrel late on Thursday, but Alshammari said the situation was delicately balanced.
“For the mean time the market may suffer from volatility. The market may be disappointed until we have a decision,” said Alshammari.
The oil exporters’ club has managed to keep prices relatively stable, between $50 and $75 a barrel, for the past three years through the deal with non-members including Russia and Kazakhstan.
The US alone, which has seen explosive output growth thanks to innovations in drilling technology, is expected to add more than a million barrels per day next year, having added more than a million in the past 12 months. With more barrels expected from Brazil, Norway and Guyana, countries outside OPEC are due to add a whopping 2.3 million barrels a day next year, according to the International Energy Agency. This is more than double the expected growth in demand for oil and so OPEC and friends are seeking to adjust to keep prices from falling.