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OPEC delegates encouraged by Russian comments on adjusting oil cut deal

Published 07/07/2017, 14:42
Updated 07/07/2017, 14:50
© Reuters. FILE PHOTO: OPEC logo is pictured ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers
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By Alex Lawler

LONDON (Reuters) - OPEC delegates said on Friday they were encouraged by Russia's openness to talking about changes to an OPEC-led deal to cut oil supplies, opening the door to more steps being considered to clear a global supply glut.

OPEC and allied non-OPEC producers such as Russia agreed to limit oil supply into 2018, but crude prices (LCOc1) have fallen since May, partly because of higher production from Nigeria and Libya, two OPEC members exempt from cutting output.

Key energy ministers, including those for Saudi Arabia and Russia, have previously said there was no immediate need for extra measures to support oil prices.

But on Friday, Russia's Energy Ministry said Moscow was ready to consider proposals, including revising the deal if need be.

OPEC delegates told Reuters that while no concrete discussions about further steps were talking place now, the Russian comments gave a positive basis for ideas, such as a larger cut, to be considered.

"Encouraging indications from Russia for such thoughts like deeper cuts give better justification to promote and develop such ideas to rebalance markets," one source close to OPEC said. "It provides a good basis, but no discussion is there yet."

Oil ministers from five countries monitoring the deal plus Saudi Arabia as OPEC president are scheduled to meet in Russia on July 24. They could recommend adjusting the pact to the wider group, which holds its next meeting in November.

OPEC officials have been talking about whether production by Libya and Nigeria should be capped, although such a step would face resistance from those countries.

In addition, OPEC also looked at a larger production cut at its last meeting held in May, only to reject it. Both ideas will probably be looked at again at the meeting this month in the form of scenarios, OPEC sources said.

But one OPEC delegate said additional steps were unlikely to win sufficient support now from enough of the 24 OPEC and non-OPEC countries participating because the existing agreement runs until March 2018.

© Reuters. FILE PHOTO: OPEC logo is pictured ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers

"I don't think the member countries are ready to do anything more," the delegate said. "Let's wait and see how the agreement works."

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