DUBAI/LONDON — Top crude exporter Saudi Arabia is lobbying oil ministers to agree next week on a nine-month extension to OPEC-led supply cuts, sources familiar with the matter said, as Riyadh seeks to ensure a price-sapping glut is eradicated.
The Organization of the Petroleum Exporting Countries, non-member Russia and nine other producers are cutting oil output by about 1.8 million barrels per day until March 2018, and will discuss extending the deal at a Nov. 30 meeting in Vienna.
Oil prices have risen to almost US$65 a barrel, the highest since 2015, supported by lower inventories. However, OPEC is wary prices could fall again since excess supply persists, while a flare-up in Middle Eastern political tensions has also played a part in the rally.
"The Saudis are lobbying to have a decision in November for nine months," said a senior oil industry source with knowledge of the matter who declined to be identified.
Indications of support for a nine-month extension have come from the very top in Saudi Arabia, OPEC's de facto leader, and Russia, the largest non-OPEC producer involved in the agreement.
Saudi Crown Prince Mohammad bin Salman signaled he was supportive of extending the agreement further into 2018, following remarks by Russian President Vladimir Putin on Oct. 4 that the deal could be stretched to the end of next year.
"The Saudi and Russian leaders have indicated it's on the cards," an OPEC source said, referring to the chances of a nine-month extension. "Why would I disagree with them?"
To be sure, the OPEC-led group is also weighing other options.
Reuters reported last month, citing OPEC sources, that the producers were leaning towards extending for nine months but could postpone a decision until early next year, given the recent rise in prices.
Despite Putin's comments on a nine-month extension, Russia has been reluctant to give a position publicly. Oil producers and the energy ministry have discussed a six-month prolongation, TASS news agency reported.
Energy Minister Alexander Novak said on Monday that Russia would determine its position later in November.
While there is a chance that a shorter timeframe of six or even three months could be agreed, and that producers may defer a decision, OPEC sources consider this less likely.
"There is a 90-per-cent chance it will be announced in November," a second OPEC source said. "Yes, for nine months."
Two other OPEC sources also said nine months was the most likely period.
The supply pact is aimed at reducing oil stocks in industrialized countries to their five-year average, and the latest figures suggest OPEC is more than halfway there.
A fifth OPEC source said a nine-month extension was likely, since part of the recent price rally was driven by factors such as the anti-corruption crackdown in Saudi Arabia and Lebanese tensions, rather than a further tightening of supply.
"If the price hike stemming from recent geopolitical developments in the Middle East eases, the likelihood of an extension of the existing agreement for a longer period will increase," the source said.