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Reuters quoted OPEC discussed cutting its oil output by a further 1-1.5 percent when it met last week, three sources familiar with the matter as saying that, and could revisit the proposal should inventories remain high and continue to weigh on prices. The Organization of the Petroleum Exporting Countries and non-member producers ultimately decided at their May 25 meeting to extend their existing supply-cutting agreement for nine months, although oil ministers including Saudi Arabia’s Khalid al-Falih confirmed deeper curbs had been debated.
One of the sources said that the idea floated was to widen OPEC’s supply cut by about 300,000 barrels per day. That would equate to a further curb of about 1 percent of April output of nearly 32 million bpd and bring OPEC’s total pledged cut to 1.5 million bpd, from 1.2 million bpd.
The source, who declined to be identified, said that “They wanted to do some scenarios and get around 300,000 bpd of extra cuts to be distributed among everyone. But I think they decided to wait and see how the market will react first.”
The initial price reaction to OPEC’s May 25 decision was one of disappointment that producers had not deepened their cuts. Brent crude fell 5 percent to below USD 52 a barrel and was trading near there on Thursday, half its level of mid-2014.
OPEC officials nonetheless hope an inventory glut will ease in the next few months as market fundamentals move closer to balance. OPEC is not scheduled to meet again to set policy until November.
The source said that “By the next meeting, if prices and the situation remain like this, they will have to do something. Everyone will be on board (for more cuts) if prices remain like they are now,” adding that he expected the market and prices to improve by the third quarter.
A second source familiar with the matter said “everything is possible”, when asked whether the option of a deeper cut could be revived.
A third source, an OPEC delegate, was skeptical that a larger cut would be agreed on by all parties, including non-OPEC producers. “I doubt it,” that source said. “There was a proposal for a deeper cut, but it didn’t work.”
A fourth source, also an OPEC delegate, was skeptical for the same reason.
Source : REUTERS
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