Ahead of OPEC’s meeting on Friday, disagreements seem to rise among member states amid calls from major consumers such as the United States and China to reduce oil prices and therefore support the global economy by producing more crude.
Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna on Friday to decide on output policy.
A report issued on Tuesday predicted that global oil demand is set to stay strong in the second half of 2018, suggesting the market could absorb extra production from the group.
Saudi Arabia, and non-member Russia have proposed relaxing production cuts gradually, while OPEC members Iran, Iraq, Venezuela and Algeria have opposed such a move.
Three sources in OPEC told Reuters on Tuesday a technical OPEC panel, OPEC’s economic commission, met on Monday to review the market outlook and present it to the ministers later in the week.
“If OPEC and its allies continue to produce at May levels then the market could be in deficit for the next six months,” one of the sources said.
Another source said: “The market outlook in the second half is strong.”
Some countries including Algeria, Iran and Venezuela said at the meeting that they still opposed an oil output increase, according to one of the sources.
Meanwhile, Russia believes that restraining production for a long time could lead to increased growth that US might not approve.
President of Russia’s second-largest oil firm Lukoil, Vagit Alekperov, said on Tuesday that oil production cuts should be halved if the oil price reaches $75 per barrel.
Alekperov also said that $75 per barrel was a fair price for oil and that Lukoil could restore its oil output to the same level as before the OPEC deal in 2-3 months.
Commerzbank commodities analyst Carsten Fritsch said that given big differences in the positions of OPEC members, the Friday meeting was likely to be tough.
“Unanimity is needed for any OPEC decision. This recalls the June 2011 meeting, when OPEC was unable to agree on an increase in production to compensate for the outages ... in Libya,” Fritsch said.
“That meeting ended without any joint declaration. The then Saudi Oil Minister Ali al-Naimi described it as the worst OPEC meeting of all time,” he added.
Adding to the tensions, Iran and Venezuela continued to insist that OPEC on Friday debate US sanctions against the two countries, but the organization’s secretariat has rejected their requests, according to letters seen by Reuters.
Before heading to Vienna, Russian Energy Minister Alexander Novak said on Tuesday that oil demand usually grows at the steepest pace in the third quarter.
“We could face a deficit if we don’t take measures,”he indicated adding, “in our view, this could lead to market overheating.”
Novak said Russia wanted OPEC and non-OPEC to raise output by 1.5 million barrels per day (bpd), effectively wiping out existing production cuts of 1.8 million bpd that have helped re-balance the market in the past 18 months and lifted oil prices to $75 per barrel from as low as $27 in 2016.
Novak said that if a decision were taken this week to raise output, OPEC and its allies could meet again in September to review the impact and fine-tune production policy.
Oil prices rose on Monday in volatile trade as market participants lowered their expectations for how much OPEC might increase production and investors assessed the impact of a trade dispute between the United States and China.
US crude oil rose 79 cents a barrel to settle at $65.85. The contract traded at a two-month low of $63.59 early in the session. Brent crude jumped $1.90 to $75.34 a barrel. US crude’s discount to Brent widened to as much as $9.75 a barrel, after narrowing on Friday.
China imposed import duties on US products on Friday, and suggested that crude oil tariffs were planned.
