OPEC needs to cut oil production to avoid an oversupplied market in 2019, according to the group’s main advisory board, composed of officials that recommend policy to the ministers.
The advisory group, officially known as the Organization of Petroleum Exporting Countries Economic Commission Board, told ministers they need to trim output by 1.3 million barrels a day from the October 2018 level to bring supply and demand into balance next year, a delegate said, asking not to be named because the talks were private.
The board’s recommendations are only advisory and OPEC ministers, who will meet in Vienna on Dec. 6, often choose a different path. Yet the view that the oil market is oversupplied is a signal the cartel is laying the groundwork for an output cut.
Saudi Arabia, OPEC’s de facto leader, faces a difficult balancing act: cut oil production and enrage President Donald Trump, or keep pumping and risk ultra-low prices blowing up its economy. The outlook for the OPEC meeting will become clearer this weekend at the Group of 20 summit in Buenos Aires, where Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin are scheduled to meet.
Prince Mohammed and Putin ended years of animosity between the world’s two largest oil exporters in 2016 and have worked together since then in a deal known as the OPEC+ group. The pair face a challenge as Brent, the global oil benchmark, heads for a 22 percent loss in November — the largest one-month drop since the global financial crisis in 2008.
Earlier this month, OPEC secretariat said in a report the group needed to pump 1.36 million barrels a day less next year than it did in October to avoid flooding the oil market in 2019. The world will need less OPEC oil next year because of weaker demand growth and a surge in U.S. production.
OPEC pumped 32.9 million barrels a day in October, as Saudi Arabia boosted production sharply, compared with 32.3 million barrels a day in January.
The recommendation from the advisory group will go first to the so-called Joint Ministerial Monitoring Committee, a small group that includes six nations, that overseas the OPEC+ 2016 agreement. The JMMC meets in Vienna on Dec 5. The following day, the recommendation will go to the full OPEC ministerial meeting, and later to a gathering of OPEC and non-OPEC ministers.
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