OPEC sees strong oil market


VIENNA — Global oil demand is set to stay strong in the second half of 2018, an OPEC technical panel forecast this week, suggesting the market could absorb extra production from the group.

The Organization of the Petroleum Exporting Countries (OPEC) meets on Friday to decide output policy amid calls from major consumers such as the United States and China to cool down oil prices and support the global economy by producing more crude.

Saudi Arabia and Russia have proposed gradually relaxing production cuts — in place since the start of 2017.

Three OPEC sources told Reuters a technical panel — the organization’s economic commission — met on Monday to review the market outlook and present it to member countries’ oil 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 panel meeting that they still opposed an output increase, one of the sources said.

Russia and Saudi Arabia have proposed that OPEC and non-OPEC countries increase production by 1.5 million barrels per day (bpd), Ecuador’s oil minister Carlos Perez said on Monday.

The move would effectively wipe out existing production cuts of 1.8 million bpd.

“There are other countries that do not want to reduce the cuts ... It’s going to be a difficult ... a tough meeting,” Perez said upon arriving in Vienna, where the 14-member OPEC is based.

Saudi Arabia and its Gulf allies have the capacity to raise output. Russia has also said that limiting supply for too long could encourage unacceptably high output growth from the United States, which is not part of the production agreement.

On Tuesday, the head of Russia’s second-largest oil firm Lukoil, Vagit Alekperov, said global production cuts should be halved and that Lukoil could restore its oil output levels within two to three 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. — Reuters