VIENNA: OPEC will meet next week amid rising global demand and a reduction in supply, which are both helping to support prices, two OPEC officials said after pre-meeting talks.
A calmer mood among national representatives and officials compared with the last OPEC meeting in November 2014 means it is likely to keep its production policies unchanged despite a persistent global oil glut.
OPEC refused to cut output at the November meeting, seeking to slow higher-cost production in the US and elsewhere that had been eroding its market share.
“The demand is getting better and there is a slight reduction in the supply. Prices are improving,” one of the officials told Reuters after experts discussions in Vienna, known as the economic commission board, which typically precedes the main meeting.
“The market has adjusted itself since the last meeting,” said another official. The OPEC meeting is scheduled for June 5.
OPEC is not expected to cut oil production at its meeting next week, and the meeting is expected to be a short one, Saudi Arabia’s Al-Hayat newspaper quoted an unnamed OPEC source as saying.
Most analysts agree the cartel will likely keep its production policies unchanged.
“We see no agreed change in OPEC policy at the coming meeting and expect continued robust production excluding unplanned outages,” UBS analysts said on Friday.
“In our view, this likely implies oil prices are toward the top end of expectations until the physical market really begins to tighten,” UBS added.
Oil prices crashed to as low as $46 per barrel in January from as high as $115 in June 2014 as US oil production grew and after OPEC’s decision in November, thus creating a situation in which global supply exceeded demand by 2 million barrels per day or more than 2 percent.
However, early signs of a production slow down in the US in the past couple of months has helped push oil prices back to $65 per barrel.
“While OPEC again is facing continued oversupply, lower oil prices do appear to be having the intended effect of reducing investment by non-OPEC producers,” UBS said.
However, it may take longer than expected for global oil markets to tighten.
A draft report of OPEC’s long-term strategy, seen by Reuters this week, forecast crude supply from rival non-OPEC producers would grow at least until 2017, meaning the North American oil boom is proving resilient despite low oil prices.