Opec faces output balancing act as US-Iran crisis worsens
London: The Organisation of the Petroleum Exporting Countries, the cartel of 14 countries pumping one third of the world's oil, is on red alert over escalating US-Iran tensions that have fuelled strong oil-price gains — but the cartel and other crude-producing nations are unlikely to end output cuts at a meeting Tuesday, traders say. Opec is acutely aware that a faltering global economy is sapping growth in crude demand, helping to offset fears of potential supply disruptions in the Middle East.
Ministers from Opec's member-nations meet in Vienna on Monday, before gathering a day later for the Opec+, a group of 24 oil-producing countries that includes major crude supplier Russia. Russian President Vladimir Putin, speaking on the sidelines of the G20 summit in Japan, insisted that oil producers would seek in Vienna to safeguard output "stability".
"We believe that our production stabilisation agreements... have had a positive effect," Putin told the Financial Times in remarks published Friday. The cartel and its oil-producer nation allies opted in December to trim daily crude output by 1.2 million barrels owing to abundant world supplies.
The reduction however contributed to oil prices soaring by almost one-third in the first quarter of 2019, with European benchmark contract Brent crude currently trading at about USD 66 per barrel, up seven percent since the last meeting.
Oil futures have jumped in recent weeks also on the US-China trade war -- but mainly owing to supply fears linked to the fast-developing crisis between Tehran and Washington. Nevertheless, worries over the demand backdrop persist.
"The weak demand outlook, primarily due to escalating (US-China) trade tensions, warrants continued production restraint," Barclays analyst Amarpreet Singh said ahead of Opec 's gatherings at its headquarters in Vienna. The banking group expects Opec "to roll over the existing agreement" struck at the end of 2018, she added.
"Concerns about a shortfall in global oil supply have resurfaced as a result of the escalation in geopolitical tensions surrounding Iran," said Caroline Bain, chief
commodities economist at Capital Economics research group in London.
