Saudi Arabia eyeing output cuts to last till end 2020

Oil prices fell Friday morning as traders price in concerns over the future of crude stocks, geopolitical tensions and fears over how COVID-19 will progress. Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen said: “This is the last trading day for the Brent July futures contract, which seems to ease quietly into its recent comfort zone range of around $35 a barrel.

While these sentiments have been affecting the pricing of the commodity, all are waiting for the next OPEC+ meeting to see where oil goes. The market, meanwhile, is also comfortable in a relative calmness.

“But the outcome of the meeting itself could create a very stable, or a very different scenario for supply and demand balances. Nothing is for granted in such meetings, OPEC+ has proved that this year,” Tonhaugen said.

He added, “Barring any major shock in global politics, the recovery in the crude markets seem to be ensured by the simultaneous recovery in daily road fuel demand indicators and gradual increase in refinery demand, while Russia and Saudi Arabia have also agreed to coordinate closely on supply management as we get closer to the 9 June OPEC+ meeting.”

On Thursday Oilprice.com reported that Saudi Arabia and several other members of OPEC are discussing the possibility of extending the current level of OPEC+ production cuts to the end of the year to support the market, but Russian oil firms could be the stumbling block, it said, citing sources at OPEC+ and Russia’s oil industry.

In a recent meeting, Russia’s oil companies failed to reach any agreement, as half of the firms supported the extension of the current cuts, while the other half of the oil executives were against extending the deep cuts and calling for the easing of the cuts, as per the OPEC+ agreement.

The OPEC+ group pledged in April production restrictions of 9.7 million bpd in May and June, before easing the cuts to 7.7 million bpd for July through December. According to Oilprice.com citing Reuters’ sources, Saudi Arabia would like to see the deeper 9.7-million-bpd cut extended through the end of 2020 to rebalance the market.

OPEC and the OPEC+ group are expected to meet via teleconference on June 9 and 10 to discuss the market fundamentals and possible tweaks to the deal they forged in April to cut nearly 10 percent of global oil production to support the market while demand is weak during the pandemic.