OPEC Output Deal ‘More Likely Than Not,’ Citigroup Says
OPEC and Russia will probably be able to reach an accord to reduce crude production and boost prices, according to Ed Morse, head of commodity research at Citigroup.
Saudi Arabia and Russia are “hungry for an agreement,” Morse said by telephone. “We’re expecting the parties that need to do something to boost prices to be serious about deciding something.”
Oil dropped after the Organization of Petroleum Exporting Countries failed to agree on country quotas in talks on Oct. 28-29 in Vienna. Non-members, such as Russia and Brazil, took part in the second day of discussions. The failure to come to an agreement raised doubts about whether OPEC can implement the first supply cuts in eight years at its Nov. 30 summit.
Rising production will make it more difficult for oil exporters to fulfill the pact to curb output, Morse said. Output will need to be cut 1 MMbopd because of higher output in Libya and Nigeria.
OPEC members said they would trim output to a range of 32.5 MMbopd to 33 MMbopd, which is due to be finalized at the next meeting. The 14-member group pumped a record 34.02 MMbpd in October, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data.
Citigroup is looking for higher crude prices next year, which will lead to rising U.S. production, Morse said.
“We expect there to be a growth in U.S. production next year rather than a shrinkage, mostly out of the Permian basin,” Morse said. “That will be at an order of magnitude of around 300,000 bopd, but if you get to $60, you’re going to get an 800,000 bopd, in all likelihood, response from the U.S.’’
Source: World Oil
