Opec on track to extend production cuts but doubts over Russia's cooperation persist

Opec is poised to extend ongoing oil production cuts amid perceived consensus among its members on Thursday (30 November) ahead of its ministers' summit in Vienna, Austria, but Russia's participation is less than certain after the Kremlin expressed doubts over the length of the proposed extension.

At the conclusion of the ministers' meeting in May, both Opec and 10 non-Opec producers agreed to extend their collective cuts of 1.8 million barrels per day (bpd) to March 2018.

While Opec members are minded to extend the cuts by another nine months to cover next year, members of the Russian delegation appeared to question the basis of extending a deal which still has over three months to run.

While oil futures are up 19% since the start of the year, both Brent and WTI benchmarks have registered declines in recent sessions over sentiment that the deal due to emerge won't be quite as substantial as the one inked in May.

Ahead of the latest meeting Saudi oil minister Khalid Al-Falih said: "My preference is to go for a nine month extension."

Iraqi oil minister Jabbar Ali Hussein Al-Luaibi said there was broad agreement among all Opec ministers on "extending the oil production cut" until the end of next year, while Iran's oil minister Bijan Zanganeh also said he would favour a nine-month extension to the current cuts.

Analysts believe a compromise would be found with the Russians, as their cut largely underpins the 500,000 barrel non-Opec reduction. It has been suggested in certain quarters that Opec might opt for a six-month deal to placate Russian concerns.

Fawad Razaqzada, technical analyst at forex.com, said a compromise between Opec and Russia would be found.

"Some bullish market participants have undoubtedly been taking profit after the recent sharp gains ahead of such an important event. Still, barring an unexpected announcement from the oil cartel, Brent is on course to end higher for the fifth consecutive month while WTI is set to close positive for the third straight month, despite recent weakness."

"Until the Opec meeting is done 'Buy the rumour, sell the news' is a very typical reaction across the financial markets, so anything less than a nine-month extension would be a real surprise, which could lead to a sharp sell-off due to the high levels of expectations."