(MENAFN- Gulf Times) Rising dollar and growing US crude production are expected to weigh heavily on the Organisation of the Petroleum Exporting Countries (Opec) as they meet in Vienna this week.
On top of the agenda of the November 30 meeting, analysts say, is an extension of a deal limiting crude-oil production beyond March 2018, when it expires.
In recent weeks, Opec leaders have been seeking to reach consensus among all its members on the extension prior to the meeting.
In November 2016, Opec members together with a group of non-members led by Russia had decided to reduce their crude output by 1.2mn barrels per day (bpd) from October 2016 levels to 32.5mn bpd in an effort to lower global inventories, rebalance supply and demand and support prices.
Opec and Russia have been leading a 24-nation coalition of oil producers in an historic pact to clear a global supply glut by reducing output. The strategy seems to have paid off, with about half the surplus in inventories gone and oil prices trading at the highest in two years.
But, Opec says, the world will still have a surplus of oil by end-March next year.
Efforts to avoid an oil glut, if proven successful, could keep Brent oil prices above $60 per barrel.
The general expectation is that the Opec will extend the pact to cut production to cover the whole of 2018. Ten non-Opec countries led by Russia are also likely to roll over their production during 2018.
A major concern for Opec members seems to be the rising crude production in the United States, where producers have ramped up output following recent rallies in crude prices.
Many analysts expect there will be a spike in the US production over the next six months to reach 10mn bpd by mid-2018.
Higher oil price will be a certain incentive for the US shale producers in particular to boost their output
The Energy Information Administration (EIA) forecasts total US crude production to average 9.9mn bpd in 2018, which would mark the highest-ever annual average output.
The International Energy Agency (IEA) has also said that the US shale oil output is expected to rise by 8mn bpd from 2010 to 2025, which would 'match the highest sustained period of oil output growth by a single country in the history of oil markets.
Higher US output obviously undermines the impact of output cuts and erodes market share for producers, both within the Opec and outside.
In a recent forecast, Opec said the demand for its own crude would rise by 460,000 bpd to 33.42mn bpd next year. This is in contrast to a forecast from the IEA, which expects a drop of 320,000 bpd to 32.38mn bpd.
Of late, commodities including oil have come under severe pressure due to dollar's appreciation. The greenback strengthened against the euro following political uncertainties in Germany.
Oil often moves inversely to the dollar, because it is transacted in the dollar. Therefore, a stronger dollar theoretically makes oil more expensive for global buyers.
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