No OPEC Meeting Scheduled Yet

Fears of a persistent supply glut still weigh heavily on the minds of traders. In addition, media reports that after more than a year of failing to agree any steps, OPEC and outside producers have stepped up diplomatic activity to fix the supply glut. Saudi Arabia, Qatar, Venezuela and non-OPEC producer Russia said on February 16 they would freeze output.

In an early sign that Moscow will stick to the plan, Russia reported on Wednesday its oil output was little changed in February. Saudi Arabia has yet to report its production, but a Reuters survey this week found no sign of an increase in February. Discussions among major oil producers, including Saudi Arabia and Russian Federation, agreeing to a production freeze were unlikely to reduce a global overhang in supply of more than 1-million barrels a day, other analysts said.

Brent oil prices edged further below $37 a barrel on Wednesday as an industry report showing a rise in US crude stockpiles to a new record countered support from producer efforts to tackle a supply glut.

US crude inventories jumped by 9.9 million barrels last week, the American Petroleum Institute (API) said on Tuesday, much more than the 3.6-million-barrel increase analysts had forecast.

Global benchmark Brent crude was down 27 cents at $36.54 a barrel by 0946 GMT (3:16 p.m. in India). On Tuesday, it reached $37.25, the highest in almost two months. US crude, also known as WTI, was down 66 cents at $33.74.

“The strong inventory build reported by the API would explain why WTI is falling more than Brent,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

The fight OPEC has been putting up in an effort to kill US shale oil has kept energy prices at historically low levels for an extended period of time. “Until we get into the spring and see crude demand pick up, oversupply will be on the front burner for the market”.

OPEC production has surged since the group in November 2014 abandoned its traditional role of cutting supply alone to prop up prices, in the hope that lower prices would curb the growth of more costly-to-develop competing supply sources.

Iranian output and exports could rise by 0.7 million bpd to 3.5 million bpd in the months ahead, according to some analysts.

JP Morgan said in an emailed note: “The combination of suggestive OPEC/Russia rhetoric and aggressive spending/production cuts from US shale players has helped sentiment enormously over the last few weeks.” However, we see the price action to be rather speculative, with no guarantees from members of the Organization of Petroleum Exporting Countries (OPEC) and others, to reach a consensus on cutting production rates to support prices.

OPEC is scheduled to meet officially in June this year; reports of a mid-March meeting between four producers have increased hopes of the organization finally considering cutting production. A Reuters report today pointed out the likelihood of the organization agreeing to cut production to drastically low levels.

Citing sources from within the organization, the report said that OPEC is likely to decide against cutting production when members meet in June. The reason for this anticipation is Iran’s oil production strategy, as the pace of increase in the country’s production rate is currently uncertain. Iran has vowed to increase production rates to levels last seen before sanctions were placed on the country, in mid-2012.