The decision anticipated to be taken by the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led allies at their next Vienna meeting, scheduled for late June, will not be easy.
OPEC and non-OPEC countries partaking in the production cut deal were supposed to decide on extending the cuts until the end of 2018, but pressure has been on the rise by consumers, especially the United States, for easing production restrictions and manage price hikes.
Under current conditions of improving fundamentals of supply and demand, met with a decline in OPEC production and a potential US embargo, oil prices experienced a 75 percent rise since last summer's rate. This has alarmed US politicians and their Beijing, New Delhi and Seoul counterparts.
Pressure has been on the rise since the International Energy Agency published its monthly report acknowledging that the oil market was now balanced and that commercial glut in major industrial countries fell by about 1 million barrels.
Strangely enough, consumers do not alone want to see the end of the agreement and more supply on the market, but Russian oil companies also expressed a similar desire.
On Friday, many statements by OPEC officials and Russia came to reflect a change in the general trend, which until a few days ago had been backing an extension of the agreement till 2018 ends. Energy ministers of Russia and Saudi Arabia said their countries were ready to ease oil production cuts to calm consumer fears and reassure the international markets that sufficient supplies are available.
Saudi Energy Minister Khalid al-Falih said the easing of restrictions would be gradual so as to not shock the market, noting that producing countries would soon have the capacity to liberalize supply and that this could probably happen in the second half of 2018.
Russian Energy Minister Alexander Novak said current cuts were in reality 2.7 million bpd due to a drop in Venezuelan production - somewhere around 1 million bpd higher than the initially agreed reductions.
Novak did not say whether OPEC and Russia would decide to boost output by 1 million bpd at their June meeting. But he said an agreement of a gradual easing was the likely outcome.
“Different options will be put forward. But, it is likely that this will be a gradual easing,” Novak said in comments published on the Russian energy ministry website.
Initial talks are being led by the energy ministers of OPEC kingpin Saudi Arabia and Russia at St. Petersburg this week along with their counterpart from the United Arab Emirates, which holds the OPEC presidency this year, sources said.
