(From L-R) Energy Minister of Russia Alexander Novak, Saudi Arabian Energy Minister Khalid Al Falih, the UAE Minister of Energy and Industry, Suhail Mohammad Al Mazroui, and OPEC Secretary General Muhammed Barkindo attend a news conference after a meeting of the 4th Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC Ministerial Meeting in Vienna, Austria ob June 23, 2018. (Photo by Askin Kiyagan/Anadolu Agency/Getty Images)


In efforts to tackle a global oil glut, OPEC and other supply-cutting nations have been coordinating output levels. After a months-long crude rally, the cartel is meeting this week to discuss increasing supply. Here's what you need to know.

When are the meetings?

  • Friday, June 22: Current members of OPEC — Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela — are scheduled to meet at 4 a.m. ET. A press conference is set to follow at 7 a.m. ET.
  • Saturday, June 23: OPEC and other countries that have agreed to coordinate supply cuts, also known as OPEC+, are slated for a 4 a.m. ET meeting, followed by a 5 a.m. ET press conference. 

How has compliance been so far?

OPEC+ as a whole has largely followed the supply-cutting agreement, with current output about 1.5 million barrels per day below September 2016 levels. HSBC analysts estimate compliance as high as 170% in April, or 850,000 barrels a day below the baseline. 

It's notable that some of that compliance has been involuntarily. Analysts say supply disruptions in Venezuela, where production has plunged to record-lows amid a crisis, have had the "biggest effect" on OPEC compliance. And a lack of investment in Angola has cut output by about 200,000 barrels per day since mid-2017. 

In fact, compliance levels of Iraq, OPEC's second-largest producer, have averaged about 45% since the beginning of the agreement. 

HSBC

Where do OPEC+ countries stand?

For output increases

  • Saudi Arabia, the unofficial leader of OPEC, has openly pushed for a rollback of production cuts. Energy Minister Khalid al-Falih recently suggested increasing production by 1 million barrels per day to prevent market overheating. There have been reports Saudi Arabia is also facing US pressure to raise supply, a claim OPEC has denied.
  • Russia, who leads non-OPEC countries, has reportedly asked for output to increase by 1.5 million barrels per day. In May, President Vladimir Putin said that any price above $60 a barrel "can lead to certain problems for consumers, which also isn’t good for producers."

Against output increases

  • Iraq has threatened to veto a proposal to reverse supply cuts, despite its own noncompliance. Iraqi oil minister Jabbar al-Luaibi said in a statement earlier this week that "producers from within and outside OPEC have not yet reached the goals set."
  • Venezuela has reportedly said it would veto an output increase. A team of HSBC analysts led by Gordon Gray said countries like Venezuela, with no spare capacity, are "understandably" against a measure that could pressurize price with no gain for themselves.

Unclear position

  • Iran has threatened to block an output increase, but Reuters reported Thursday the country could go along with Saudi Arabia and Russia "under certain conditions."

What are analysts expecting?

Analysts expecting the cartel to ease supply cuts have predicted increases of anywhere from 300,000 to 800,000 barrels per day over the next few quarters. A production increase could already be somewhat priced in, they say, with an uptick in volatility and with crude down as much as 4% ahead of the meeting. 

But a proposal needs to pass unanimously among all countries, rather than by a majority vote, so it's possible the meetings could end without a hard target. Michael Cohen, an analyst at Barclays Research, said the meeting could be "contentious."

"We think a clear, quantified increase in supply is unlikely at the forthcoming meeting," Gray said. "We think the most likely press communiqué will be on less precise lines, most probably committing to keep the market adequately supplied but with little further detail."

Barclays

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