Big oil traders doubt OPEC deal will bring sup­ply cuts

Out­put in­creases from Libya, Nige­ria cast new doubts

Kuwait Times - - BUSINESS -

OPEC’s deal to cut oil pro­duc­tion is un­likely to re­sult in a sub­stan­tial re­duc­tion in sup­plies, some of the world’s big­gest oil trad­ing com­pa­nies said this week, mean­ing the market is un­likely to re­bal­ance un­til well into 2017.

The price of crude oil has sta­bi­lized around $50 a bar­rel since the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries agreed the out­put deal on Sept 28. But rising pro­duc­tion from OPEC mem­bers Libya and Nige­ria is cast­ing doubts over whether the agree­ment can be ef­fec­tive.

“Clearly, they have put a floor on the market,” Gun­vor Chief Ex­ec­u­tive Tor­b­jorn Torn­qvist told the Reuters Com­modi­ties Sum­mit. “But I don’t think they can do any sub­stan­tial cut. There are too many un­cer­tain fac­tors in­volved. These two coun­tries can wipe out any other deal that has been agreed.”

Any agreed re­duc­tion will not af­fect ac­tual sup­plies un­til next year, Torn­qvist said, be­cause the OPEC meet­ing in Vi­enna on Nov. 30 to set sup­ply pol­icy will be too late to ad­just cargo load­ing dates be­fore 2017. “Re­al­is­ti­cally, they can’t do any­thing till Jan­uary. We’re go­ing to have quite a lot of oil in the market un­til then. I don’t have high ex­pec­ta­tions of sus­tained higher oil prices, cer­tainly for the medium term,” Torn­qvist said. Mer­cu­ria Chief Ex­ec­u­tive Marco Dunand said prices could fall to the low $40s if OPEC failed to agree any­thing at the Novem­ber meet­ing but could rise to the high $50s and above should it re­move as much as 1 mil­lion bar­rels a day from the market.

“Saudis wanted to take back con­trol of the market. But whether they can con­vince OPEC and non-OPEC to man­age in­ven­to­ries and price is still a big ques­tion,” Dunand told the sum­mit.

“WORK TO DO”

Glen­core’s head of oil, Alex Beard, was also skep­ti­cal OPEC’s deal was a game changer. “We need to see the real deal in Novem­ber rather than the talk of the idea of do­ing a deal,” he said. “Libya’s pro­duc­tion is cer­tainly go­ing up at the mo­ment and Nige­ria is ob­vi­ously off its lows as well. So I guess my out­look on the OPEC meet­ing is they’ve still got their work to do to come up with the de­tail that will con­vince the market.”

Gun­vor’s Torn­qvist said the oil market was un­likely to re­bal­ance un­til the mid­dle or sec­ond half of 2017, giv­ing a time frame sim­i­lar to that ex­pected by Vi­tol’s chief. Vi­tol Chief Ex­ec­u­tive Ian Tay­lor said on Mon­day that the oil price could reach the high $50s to low $60s if OPEC and other pro­duc­ers cut sup­plies by 1 mil­lion bar­rels per day.

“But can they re­ally give us a mil­lion be­tween OPEC and non-OPEC? It’s a tough call,” Tay­lor said. The head of BB En­ergy, Mo­hamed Bas­satne, told the sum­mit that he did not ex­pect a rapid rally, or an early re­bal­anc­ing of sup­ply and de­mand.

“I do think that the market will prob­a­bly have found some kind of bot­tom be­tween $45 and $50,” he said. “It prob­a­bly will go higher, but it still needs time to re­bal­ance ... I don’t see it re­bal­anc­ing un­til prob­a­bly sec­ond half of 2017.” As­set man­ager Pierre An­durand, whose en­ergy fund has some $1.36 bil­lion in as­sets un­der man­age­ment, said he be­lieved non-OPEC sup­ply was well on the way to shrink­ing quickly enough, while de­mand looked healthy, so the OPEC agree­ment would help speed up any oil price re­cov­ery.

“With the capex cuts that we’ve seen, and have car­ried on see­ing, I think the non-OPEC de­clines are struc­tural. So we don’t see a wall of sup­ply com­ing in 2017. We see the op­po­site,” he said. “Even with­out an OPEC cut the mar­kets were get­ting bet­ter and we were go­ing to go up fur­ther.” — Reuters

GASC post­pones rice ten­der un­til Mon­day

Egypt’s state grain buyer GASC post­poned yes­ter­day an in­ter­na­tional rice ten­der un­til Mon­day, the head of GASC told Reuters. GASC was seek­ing at least 100,000 tons of white medium-grain rice for ar­rival by Nov. 30 in a ten­der yes­ter­day. “The ten­der was post­poned due to sup­plier re­quests to com­plete doc­u­ments for the ten­der,” the head of GASC said, with­out spec­i­fy­ing fur­ther .

Emi­rates NBD joins In­dia’s ICICI on block chain project

Dubai’s largest bank, Emi­rates NBD , is work­ing with In­dia’s ICICI on a pilot project to use blockchain tech­nol­ogy for global remit­tances and trade fi­nance, in what they say is a first for banks from the Mid­dle East and In­dia.

The project showed banks can sig­nif­i­cantly cut trans­ac­tion costs and time, while demon­strat­ing a near real-time trans­fer of in­voices and pur­chase or­ders for trade fi­nance pur­chases, Emi­rates NBD said. Blockchain, which orig­i­nates from dig­i­tal cur­rency bit­coin, works as an elec­tronic trans­ac­tion-pro­cess­ing and record-keep­ing sys­tem that al­lows all par­ties to track in­for­ma­tion through a se­cure net­work, with no need for third-party ver­i­fi­ca­tion.

Sev­eral banks have an­nounced plans to use the tech­nol­ogy, with Mi­crosoft join­ing forces with Bank of Amer­ica Mer­rill Lynch to build and test the tech­nol­ogy and cre­ate a blockchain-based frame­work that could even­tu­ally be sold to other busi­nesses, the pair said last month.

SEOUL: A cur­rency trader walks by the screen show­ing the Korea Com­pos­ite Stock Price In­dex (KOSPI), at the for­eign ex­change deal­ing room in Seoul yes­ter­day. — AP

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