November 28, 2017 / 1:28 PM / 18 days ago

Citi's Morse warns of oil sell-off without OPEC deal on output to end-2018

LONDON (Reuters) - The world’s largest exporters of crude oil must agree to extend their existing agreement on curbing output to the end of next year in order to avoid a sell-off in the price, Citigroup’s head of commodity research on Tuesday.

Ed Morse told Reuters in an interview he expects the Organization of the Petroleum Exporting Countries, together with their 10 partners, to agree to extend their current deal to cut supply by 1.8 million barrels per day to the middle of next year, rather than the end.

“I’d be surprised if it is a nine-month extension ... Unless they do a nine-month there will be a sell-off,” he said.

OPEC and other key producers, including Russia, meet on Nov. 30 to discuss whether to continue to limit production in an effort to drain global inventories to help push up prices.

They cut production by 1.8 million barrels per day (bpd) in January and agreed to hold down output until March. The market had expected OPEC to extend the limits by another six to nine months, but this is now less certain.

“No matter how we look at the numbers over a five-year period, I don’t see how the relationship, as a supplier agreement, really works,” Morse said.

“OPEC and Russia will both realize they are losing market share and they will be better off going back to a more competitive environment.”

Morse said it would take Russia between four and six months to raise its production by the 300,000 bpd it agreed to cut.

Reporting by Ron Bousso; Writing by Amanda Cooper; Editing by Louise Heavens

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