Abu Dhabi: No decision on cutting or freezing oil production is expected at Organisation of the Petroleum Exporting Countries (Opec) meeting in Vienna on Thursday, analysts said.
The meeting takes place as oil prices recover from a low of $27 (Dh99.17) per barrel in January to around $50 per barrel on Wednesday due to increase in demand and disruption in supplies in Nigeria, Libya and Canada.
“Despite the improvement in market conditions and the pressure on some of Opec’s more strained economies, we do not expect the producer’s bloc to announce a change in policy in the form of a production cut or freeze,” said Edward Bell, commodity analyst at Emirates NBD.
“Rather, we anticipate that flows from Opec producers will continue to move higher despite the risks that may pose to the sustainability of the oil rally.”
Total Opec production has increased substantially on year ago levels, up over 850,000 barrels per day as of the end of April, according to an analysis by Emirates NBD.
In the short-term, volumes from Saudi Arabia are likely to pick up on higher seasonal domestic demand for crude needed in power facilities.
Volumes are expected edge higher in other Gulf countries as the economies target higher output by the end of the decade.
Avtar Sandu, senior commodities manager at Phillip Futures, said Opec’s strategy is working so far, with oil prices moving up.
“We are not expecting a production target nor an agreement. The higher oil prices and lower cost of production have brought back profits for most Opec members. On the other hand, non-Opec members like shale oil producers are still in the red due to their significantly higher cost of production.”
Saji Sam, partner in Oliver Wyman’s Energy Practice, expects less urgency for Opec producers to agree on a production freeze as oil prices recover.
“Given the recent oil rally close to $50 following unplanned production outages in Nigeria, Venezuela and Kuwait and expectations of supply and demand to tighten in the short term, there is less urgency for Opec producers to agree on a production freeze. Their strategy of supplying the world with the most competitive oil is working.”
Opec has not taken any decision to control oil prices in their last three meetings, but the organisation is still effective, analysts said.
“It’s influence in acting as a bloc has reduced but the importance of individual countries is now coming to the fore,” Bell said.
“Saudi Arabia is acting on its own policies, Iran [is] acting its own policies, Iraq [is] doing it individually. These are the things that can move and affect markets much more than if Opec comes to an agreement which under the current conditions looks very unlikely.”
Meanwhile, energy ministers from the UAE and Qatar said oil markets were showing a positive trend towards rebalancing as demand rises and production slows around the world.
In a tweet, UAE Energy Minister Suhail Al Mazroui said: “We believe that Opec policy of giving the market time to balance itself have proven to work but it still need some time for proper balance,” Al Mazroui said.
“The market is still in correction mode and the signs are positive.”
A Reuters report said Gulf Opec members including Saudi Arabia are looking to revive the idea of coordinated oil-output action by major producers when the group meets on Thursday, a senior Opec source said, but Iran signalled the country was not ready for any such pact.
This will the first Opec meeting for Saudi Energy minister Khalid Al Falih, who replaced long serving Ali Al Nuaimi in a cabinet reshuffle last month.