By Rania El Gamal, Olesya Astakhova and Ahmad Ghaddar
DUBAI/MOSCOW/LONDON, Oct 22 (Reuters) - OPEC and its allies
will consider whether to deepen cuts to crude supply when they
next meet in December due to worries about weak demand growth in
2020, sources from the oil-producing club said.
Saudi Arabia, OPEC's de facto leader, wants to focus first
on boosting adherence to the group's production-reduction pact
with Russia and other non-members, an alliance known as OPEC+,
before committing to more cuts, the sources said.
OPEC members Iraq and Nigeria are among the countries that
have failed to comply properly with pledged output reductions.
Saudi Arabia and other Gulf producers in the Organization of
the Petroleum Exporting Countries have been delivering more than
their share of promised cuts to stabilise the market and prevent
prices from falling.
Riyadh has been pumping some 300,000 barrels per day (bpd)
below its output target, taking the lion's share of the curbs.
"The Saudis want to prevent oil prices from falling. But now
they want to make sure that countries like Nigeria and Iraq
reach 100% compliance first as they have promised," one OPEC
source said.
"In December we will consider whether we need more cuts for
next year. But it is early now, things will be clearer in
November."
A second OPEC source said: "Of course deeper cuts are an
option, but some things should happen before that. The rest of
the OPEC+ countries will not cut deeply if Iraq and Nigeria
don't comply 100%."
Two sources from OPEC and non-OPEC producers said that next
month the JTC committee, which monitors compliance with the
pact, could start considering scenarios for deeper cuts and make
its recommendations to the OPEC+ meeting for debate in December.
"Lower seasonal demand in winter... may affect prices, going
down. To reassure the (oil) market it would be better to deepen
the cuts," a source familiar with Russian thinking said.
Riyadh is worried about the oil demand outlook for 2020 amid
trade tensions between the United States and China and their
impact on crude prices, two sources familiar with Saudi thinking
said.
But Iraq is struggling with anti-government protests and
Nigeria was granted a higher oil output target in July as the
African country plans to expand its oil industry. OPEC+ has since January implemented a deal to cut oil output
by 1.2 million bpd to support the market. The pact runs to March
2020 and the producers meet to review policy on Dec. 5-6.
Brent crude LCOc1 on Tuesday was trading around $59 a
barrel, down from a 2019 high near $75 in April. Concern about
weaker economies and demand due to uncertainties such as Brexit
and the U.S.-China trade dispute have overshadowed lower supply.
"The Saudis would like to see oil prices higher than now.
They are asking the other countries to comply first before they
commit to another cut to boost prices," a third OPEC source
said.
"They are making it clear that prices are up because of
their overcompliance."
OPEC also sees slowing demand and a rise in supply from
non-member producers next year, that source added.
OPEC's own numbers also show a drop in demand for the
exporting group's crude next year and higher supply from rivals
such as the United States.
Global demand for OPEC crude will average 29.6 million bpd,
OPEC said in its latest monthly oil market report, a drop of 1.2
million bpd from 2019.
This could press the case for further supply restraint in
2020, another source said.
"But it is not just about the numbers. Any decision to cut
is also a political one," that source said.
(Editing by Dale Hudson)