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Major oil producers will consider further cuts in their output at a meeting this week, but analysts doubt that they will manage to sustain crude prices brutalized by the US-China trade war.
OPEC oil exporters and key non-OPEC members want to end the price cuts that have been sustained despite previous cuts in production and sanctions imposed by the United States which limited supplies to Iran and Venezuela.
According to analysts, the OPEC + Joint Ministerial Monitoring Committee, which oversees last year's supply reduction agreement, has few options for meeting in Abu Dhabi on Thursday. .
UAE Energy Minister Suheil al-Mazrouei said on Sunday that the group would do "all that is needed" to rebalance the crude oil market, but admitted that the problem was not there. not entirely in the hands of the world's largest producers.
At a press conference held in Abu Dhabi before the World Energy Congress, due to begin Monday, he said the oil market was no longer governed by the supply and demand, but that it was more influenced by US-Chinese trade tensions and geopolitical factors.
The minister said that although further cuts are being considered at Thursday's meeting, they may not be the best way to boost falling prices.
"Whatever the group sees that will balance the market, we are committed to discussing it and hopefully we will do whatever is necessary," he said.
"But I would not suggest skipping breaks every time we have a problem of trade tensions."
While cuts may help prices, they could also mean that producers will still lose market share, analysts say.
"OPEC has traditionally used production cuts to keep prices higher," said R. Raghu, head of research at the Kuwait Financial Center (Markaz).
"However, this has resulted in a reduction in OPEC's market share in the global crude market, which rose from a peak of 35% in 2012 to 30% in July. 2019, "he told AFP.
The group of 24 OPEC + countries, dominated by the king of the cartel, Saudi Arabia and the Russian giant of non-OPEC production, agreed to cut production in December 2018.
This occurred as a declining global economy and an American shale oil boom threatened to create a global glut.
Previous reductions in supply have for the most part been successful in driving up prices.
But this time, the market has continued to retreat, even after OPEC + agreed in June to extend a previous agreement by nine months reducing production by 1.2 million barrels a day.
– Commercial War –
The new factor is the trade dispute between the world's two largest economies, whose equal tariffs have led to fears of a global recession that will undermine demand for oil.
Saudi economist Fadhl al-Bouenain said the oil market had become "extremely sensitive to the trade war between the United States and China".
"What's happening with oil prices is outside the control of OPEC and certainly stronger than its capacity," Bouenain told AFP.
"As a result, I believe that OPEC + will not resort to further cuts in production" as this would further weaken the group's already shrinking market share, he said.
The European benchmark Brent was selling at 61.54 dollars a barrel on Friday, in contrast to more than 75 dollars at the same time last year, but up from 50 dollars at the end of December 2018.
The deliberations also coincide with the stalled production of Iran and Venezuela and the slowing growth in US production, which means that the supply is not excessively high.
"The growth of shale production in the United States is not as strong as in previous cycles, and OPEC production has reached its lowest level in fifteen years, after falling by 2.7 million barrels a day in the last nine months, "said Standard Chartered in a comment last month. .
"We think that oil policy options for major producers are limited, for now," said the investment bank.
No decision will be taken at Thursday's meeting, but it is expected to produce recommendations before the OPEC + ministerial meeting in Vienna in December.
Rapidan Energy Group said the alliance may need to cut production by an additional one million bpd to stabilize the market.
But the problem will be to decide which member countries will bear the burden of any further reduction.
Saudi Arabia, which de facto chairs OPEC and supplies about a third of the cartel's oil, surpassed its market share last time.
The oil sector, Khalid al-Falih, was replaced Thursday by Prince Abdulaziz ben Salman, Minister of Energy, in the night from Sunday to Sunday, in view of the highly anticipated registration of the oil giant Aramco.
Bouenain said he believed Riyadh would be likely to resist further cuts, given the impact on the kingdom's revenues.
Raghu said that "without a favorable resolution of the conflict, the OPEC production cuts will not result in a substantial rise in oil prices."
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