OPEC signals larger 2017 oil surplus

Russian producers agree to cut oil output but details elusive

LONDON, Dec 14, (RTRS): OPEC on Wednesday signalled a growing oil supply surplus next year unless members implement their deal to curb output from record levels and outside producers also deliver on cutback pledges made at the weekend.

The Organization of the Petroleum Exporting Countries pumped 33.87 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, up 150,000 bpd from October, OPEC said in

Chairman of the management Board of Russian Gazprom Neft oil company Alexander Novak (seated left), and Managing Director of Iran’s Central Oil Fields Company Salbali Karimi sign a memorandum of understanding as Iranian Oil Minister Bijan Zanganeh (top right), and Russian Energy Minister Alexander Novak

a monthly report.

OPEC’s own figures show the group’s output has continued to rise, adding to a global glut, ahead of the January start of its first supply cut agreement since 2008. This could raise questions about its ability to comply fully with the deal.

But OPEC was hopeful that supply curbs pledged by Russia and other non-members at the weekend, in addition to its own reductions, will tackle the surplus and support prices, which at $55 a barrel are still half the level of mid-2014.

The non-OPEC cuts should help to “accelerate the reduction of global inventories and bring forward the rebalancing of the oil market to the second half of 2017,” OPEC said in the report.

look on in Tehran, Iran on Dec 13. Iran and Russia signed memorandums of understanding on Tuesday to develop two oil fields in western Iran in a bid to boost its crude production. The two countries signed MOUs to study the Cheshmeh-Khosh and Changuleh fields of Iran. (AP)

To speed it up, OPEC last month finalised a plan to cut output by about 1.20 million bpd from Jan 1 to 32.50 million bpd. On Saturday, non-member countries pledged curbs of around 560,000 bpd in the first such move since 2001.

The report is the latest to show output hitting new peaks. The November OPEC production figure is the highest since at least 2008, according to a Reuters review of past OPEC reports.

OPEC’s figures show more than twothirds of November’s extra barrels came from Libya and Nigeria, both of which are exempt from cutting output because their production has been curbed by conflict. Total output is 1.37 million bpd above the new target. In the report, OPEC raised its forecast of non-OPEC supply slightly in 2017 to 300,000 bpd, although it said the forecast was under review following Saturday’s meeting.

With the demand for OPEC crude in 2017 expected to average 32.63 million bpd, the report indicates there will be an average surplus of 1.24 million bpd if OPEC keeps output steady. Last month’s report pointed to a 950,000 bpd surplus.

OPEC did not give a detailed forecast of the outlook if all parties cut supply as promised. The International Energy Agency said on Tuesday the market could show a shortfall of 600,000 bpd early next year in this scenario.

Meanwhile, Russia’s energy minister said on Wednesday he had reached a framework agreement with oil companies on how to implement an output cut, but the producers said there were still details to be worked out.

There are doubts that Russian oil companies, with their own interests and plans, will be able to hammer out a joint strategy to cut the country’s production, which has reached a post-Soviet high of more than 11 million barrels per day (bpd).

Russia as well as other non-OPEC and OPEC producers have agreed to slash output by almost 1.8 million bpd to fight global oversupply, which has hammered the price of oil, the chief commodity export for Moscow and some other developing countries.

Of that, Russia has pledged to cut output by 300,000 bpd to 10.947 million bpd in the first six months of 2017.

“We agreed that the reduction will be in proportion to the production volumes (of each company),” Energy Minister Alexander Novak told reporters after meeting 12 oil producers that account for around 90 percent of Russian output.

This is the first such deal between the Organization of the Petroleum Exporting Countries and Russia since 2001, when Moscow agreed to cut oil exports by 150,000 bpd — a promise it later reneged on due to rising oil prices.