Even as OPEC appears to be on course to re-extend its production-cut agreement with other oil producers, the group has begun preparing for the eventual wind-down of the agreement, sources told Bloomberg.
Concerned that output could once again swamp the oil markets upon the expiration of the production cuts, the oil cartel is looking at ways to gradually unwind the agreement to prevent the accumulation of excess supply, according to Bloomberg’s sources.
A framework for the plan is expected to be discussed at next month’s OPEC meeting, according to Bloomberg.
Earlier this week, the Saudi Energy Minister, alluded to such a plan.
“When we get closer to that [targeted global supply] we will decide how we smoothly exit the current arrangement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories,” he told Reuters.
OPEC is expected to extend its production-cut agreement until the end of 2018, OPEC sources told Reuters earlier this month.
“I think there’s a consensus among the collective that we should keep that extension and indeed even deeper cuts if we need for as long as it takes to firm up the market,” the Nigerian Minister of State for Petroleum, Emmanuel Ibe Kachikwu, said, according to Reuters.
In January, OPEC along with several other oil-producing nations agreed to collectively cut oil-production by 1.8 billion barrels per day (b/d). Compliance with the deal reached 120% in September, according to a report by the group’s Joint Ministerial Monitoring Committee (JMMC).