Oil falls from $40 on doubts over early OPEC meeting

Marco Green
June 3, 2020

"The most notable non-compliance is from Iraq, where other members exert a significant amount of geopolitical influence".

Without a meeting to make changes to the deal, the group is due to start easing its cuts from July. Oil erased gains in NY, falling 1.4% to $36.30 a barrel as of 6:55 a.m. local time. Earlier in the session, oil fell when Bloomberg reported the Thursday meeting was in doubt.

Russian Federation and Saudi Arabia are inching closer to a deal which will keep production low as much of the world slowly emerges from lockdown.

The pair are discussing a compromise that would see cuts maintained until September 1. During the past week the oil market has continued to move higher in the belief that the OPEC+ group of producers would extent a deal to curb production. Without assurances on compliance, Moscow and Riyadh warned that talks scheduled for June 9-10 may not happen either, the people said.

"The disagreement is now on whether those countries should "make-up" for their excess production by a steeper curtailment in the coming months".

"Despite Iraq's severe financial constraints, we're addressing technical issues that will allow us to further reduce oil output", Allawi tweeted, adding that "We remain committed to the OPEC+ deal, and to doing our part towards ensuring a stable and secure global energy market".

His Nigerian counterpart Timipre Sylva posted a similar message on Instagram on Tuesday. The problem however is once again what to do with countries that fail to deliver the promised cuts.

The Organization of the Petroleum Exporting Countries and other producers including Russian Federation, known as Opec+, are cutting output by 9.7 million barrels per day (bpd), about 10 per cent of pre-coronavirus global output, in May and June to support prices.

The Organisation of Petroleum Exporting Countries and its allies led by Russian Federation are moving closer to a compromise on extending current oil output cuts and are discussing a proposal to roll over supply curbs for one to two months.

The cuts are now due to run through June, scaling back to a reduction of 7.7 million bpd from July to December, but Saudi Arabia has been pushing to keep the deeper cuts in place for longer.

Other reports by Click Lancashire

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