Saudi Arabia and Russian Federation seek 'full conformity' from Opec+ producers

Daniel Fowler
September 13, 2019

The Thursday meeting of the Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ alliance will be attended by Saudi Arabia's new oil minister, Prince Abdulaziz bin Salman.

United Arab Emirates Energy Minister Suheil Al-Mazrouei said on Sunday that the group will do whatever necessary to stabilize the market, and that further production cuts could be considered.

Crude oil prices on Tuesday rose to the highest level since July after reports said oil cartel Opec and Russian Federation have agreed to extend a deal on production curbs even as Opec head the group has been "very conservative" with its oil demand estimates.

Brent crude was down 17 cents, or 0.3%, at $60.21 a barrel by 0053 GMT, while U.S. West Texas Intermediate (WTI) was off by 14 cents, or 0.3%, at $54.95.

Saudi Arabia, meanwhile, cut back on exports of crude and other energy products as part of a longstanding OPEC effort to boost prices.

USA crude stocks fell 7.2 million barrels last week, more than analysts' expectations for 2.7 million-barrel draw, data from industry group the American Petroleum Institute showed.

OPEC agreed on Thursday to trim oil output by asking over-producing members Iraq and Nigeria to bring production in line with their targets as the group strives to prevent a glut amid soaring U.S. production and a slowing global economy.

Oil prices reversed course even after a very bullish oil inventory number as the market is now adjusting to the potential return of Iran to the global oil market.

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Fueling concerns Thursday, a report by the Paris-based International Energy Agency warned that growth continued to weaken amid "uncertainty around the global economy, and particularly trade".

The US Energy Information Administration (EIA) also slashed its demand forecasts this week.

"Our oil supply-demand outlook for 2020 calls for additional OPEC production cuts to keep inventories near normal", Goldman analysts wrote in a note. That's a nod toward the trade war between China and the USA, which has seen billions of dollars in tariffs levied between them.

In Canada - a non-OPEC oil exporter - the report says demand is expected to be up slightly in 2020 compared with 2019, which began with five months of stagnant growth followed by solid growth in June.

OPEC has pointed to rising global production next year, particularly in United States shale fields, while data from the American Petroleum Institute (API) showed U.S. crude stocks fell last week by 7.2 million barrels, more than twice the amount analysts in a Reuters poll had forecast.

The IEA noted that in June the USA overtook Saudi Arabia to become the world's top oil exporter.

Also feeding the bearish sentiment, the International Energy Agency, which advises industrial economies on energy policy, said surging U.S. output would make balancing the market "daunting" in 2020.

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