OPEC Cut Extension Likely at the May 25 Meeting.....

OPEC's recent press release regarding its Ministerial Monitoring Committee (JMMC) meeting held in Kuwait City suggests a production cut extension in May is very likely. Specifically, the JMMC noted that "certain factors, such as low seasonal demand, refinery maintenance, and rising non-OPEC supply, have slowed down the positive impact of the production adjustments on inventory drawdowns. However, the end of the refinery maintenance season and noticeable slowdown in U.S. stock build as well as the reduction in floating storage will support the positive efforts undertaken to achieve stability in the market," Although the JMMC's language is not exactly clear, it would seem that the committee is leaning towards recommending extending the output cut. Further, numerous OPEC Energy Ministers have recently expressed their support for an extension. Specifically, Algerian Energy Minister Nouredine Bouterfa recently told reporters an extension could benefit the market.

The JMMC plans to deliberate on whether a production cut extension is needed and will submit its recommendation to participating OPEC and Non-OPEC countries before the meeting in May. Further, the committee has asked the OPEC Secretariat to review oil market conditions and come back with recommendations in April regarding an extension of the agreement. Should the cartel agree to extend its output cut, global oil inventories would further tighten and oil prices should move higher (potentially into the $55 to $60 per barrel range).