Opec to discuss levels tomorrow amid consensus to cut

Opec members will gather tomorrow to discuss by how much crude production should be reduced under the Opec, non-Opec deal, after the Joint Ministerial Monitoring Committee (JMMC) recommended today to cut output by at least 1mn b/d next year in order to manage inventory.

There were indications that some delegates were willing to be flexible in the interests of reaching an agreement. A cut of 800,000-900,000 b/d was also discussed today.

Delegates that attended the JMMC meeting said precise quotas for participating countries party to the deal would be agreed at tomorrow's Opec gathering and for the meeting on 7 December between Opec and non-Opec countries, led by Russia.

The Joint Technical Committee (JTC), which met earlier this week, recommended an Opec, non-Opec collective cut of at least 1mn b/d next year to stem the expected rise in inventories in the first quarter. The recommendation was followed by the JMMC today.

Uncertainty remains over the baseline from which the production cuts would be made. Some delegates said it would be September or October output, whichever was the highest, while others said the baseline would comprise October production because it was the most recent month for which reliable data was available.

Saudi Arabia, which produced 11.1mn b/d in November, would shoulder the bulk of the Opec cut, given that it is the group's largest producer. Riyadh's supply to the international and domestic markets was 11.27mn b/d in November, with the balance coming out of storage. Saudi crude loadings in November came to 7.67mn b/d in November, up from 7.29mn b/d in October, according to Argus preliminary estimates.

Oman's oil minister Mohammed bin Hamad al-Rumhy said after the JMMC meeting that "there is a consensus to reduce the level of the production" among participants in the Opec, non-Opec output restraint pact.

The overall cut level and its allocation have yet to be settled, he said. But later added that the Joint Technical Committee (JTC) that met last week had advised on the necessity of a production cut of "at least 1mn b/d to manage inventory."

Asked if there is time enough to sort out the details of a cut before Opec ministers meet in full session with their non-Opec counterparts on 7 December, the minister said "yes".

Cash-strapped Iraq, which is keen to maximise its output, is agreeable to supporting a cut and would join it. But Baghdad has indicated that additional studies on longer term production strategy are needed.

Although Oman is not a major producer, with output of around 1mn b/d, and a cut pledge under the December 2016 arrangement of just 45,000 b/d, al-Rumhy's comments are significant because he is a member of the Joint Ministerial Monitoring Committee (JMMC), which includes key pact members Saudi Arabia and Russia.

Asked about the status of the JTC's advice, al-Rumhy said "the JMMC really does not argue with the JTC".

The minister said that Russia has agreed to cut. He also said the arrangement would be for the first six months of 2019.

The JMMC recommendation only represents the opinion of the committee's six members — Saudi Arabia, Kuwait, Algeria and Venezuela from Opec and Russia and Oman from outside Opec.

Iran's oil minister Bijan Namdar Zanganeh is set to arrive in Vienna later in the evening. Tehran has indicated that it is unwilling to discuss a quota for itself while it is under US sanction.

Russian oil minister Alexander Novak left Vienna following the JMMC meeting to attend a meeting of the Eurasian Economic Union in St Petersburg. As on previous occasions, he is likely to consult with Russian president Vladimir Putin on the size of the Russian cut.

Opec ministers are scheduled to meet tomorrow at 10:00 CET (09:00 GMT).