OPEC to make decision on cuts as part of regular meeting

The Organization of Petroleum Exporting Countries will hold meetings with its non-OPEC counterparts to decide the future of production cuts on the same day as the group’s scheduled semi-annual meeting on May 25, according to multiple sources.

The group’s decision to pull back on production helped to bolster oil prices above the $50 per barrel mark, but OPEC still needs to decide whether or not those cuts will continue beyond June of this year.

A number of key OPEC members including top exporter Saudi Arabia support extending the group’s cuts into the second half of the year if all participating producers, including those outside the group, agree, reports Reuters.

“It all depends on Russia’s position,” an OPEC delegate said.

Moscow has not stated whether it supports prolonging the curbs, although Energy Minister Alexander Novak said this month that Russia would soon start consultations with its own oil producers about the possibility of doing so.

The May 25 date could be changed as the meeting approaches, but the fact that OPEC plans to hold same-day meetings suggests the group hopes to settle extending cuts more quickly than when it initially pulled back on production. Last year, OPEC met on November 30, to decide its own output cuts, and a gathering with non-OPEC producers took place more than a week later.

Unclear if Nigeria, Libya and Iran would keep exemptions

Under the terms of the production deal OPEC struck with other producers outside of the group last November, Nigeria and Libya were both excluded from making production cuts due to internal conflicts, and Iran was allowed to increase production 90 MBOPD to approximately 3.8 MMBOPD as the country’s industry recovers from years of international sanctions. United Arab Emirates Energy Minister Suhail al Mazrouei said it is too soon to tell if those exemptions will be extended as well.

Iran will probably be allowed to keep production unchanged if OPEC decides to extend its deal beyond the first half of the year, Kuwaiti Oil Minister Issam Almarzooq said.

“I think they will keep the same level if the deal is extended,” Almarzooq, who heads the committee monitoring compliance with the cuts. Kuwait was the first country to call for extending production cuts beyond June. Oil prices will increase as demand improves and chips away at inventories in the second half, he said.

Iran is showing “good cooperation” under the deal, Almarzooq said. “They are not cutting, but they aren’t increasing output from what was agreed on.”

Most U.S. basins will remain economic if current deal continues – EnerCom Analytics

In EnerCom Analytics April Energy Industry Data & Trends reports, the firm modeled WTI prices through 2018 under a number of different scenarios, including one in which OPEC continues its production cuts and Nigeria, Libya and Iran all reach their stated production goals. In EnerCom’s model, the majority of U.S. basins remain economic even if the three OPEC members increase production to their intended targets.

To find out the price EnerCom expects oil prices to hit depending on OPEC’s May decision, as well as a number of other factors including a potential U.S. border tax and key rate increases from the U.S. Federal Reserve, you can purchase EnerCom Analytics’ April Energy Industry Data & Trends report by clicking here, or start a free trial and view the March report, which covered the effects of service cost inflation.

Analyst high and low estimates for WTI

To see the median analyst estimate and EnerCom’s forecast for WTI price, click the graph.

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