OPEC, non-OPEC coun­tries to dis­cuss oil cuts: Rus­sia

Kuwait Times - - BUSINESS -

Rus­sia yes­ter­day said it will take part in a meet­ing of OPEC and non-OPEC mem­bers as oil prices wob­bled on doubts over the im­pact of an out­put cut deal. En­ergy Min­is­ter Alexan­der No­vak will at­tend the meet­ing in Vienna on Satur­day ex­pected to nail down de­tails on im­ple­ment­ing the agree­ment reached last week.

Af­ter months of dis­agree­ment, OPEC mem­bers on Novem­ber 30 ham­mered out a deal to cut oil out­put for the first time in eight years. Moscow-which is not a mem­ber of the oil car­tel-has said it is ready to re­duce crude out­put by 300,000 bar­rels a day in the first half of 2017.

The OPEC agree­ment ended weeks of un­cer­tainty and volatil­ity on crude mar­kets as the key play­ers bick­ered over who would shoul­der the big­gest bur­den of the cuts. Oil prices shot up on the an­nounce­ment, which was more am­bi­tious than many an­a­lysts had ex­pected.

Prices reached a 16-month high late Mon­day on the back of an an­nounce­ment by OPEC of the meet­ing with non-mem­bers but quickly dipped overnight as the lustre of OPEC’s de­ci­sion to cut pro­duc­tion faded. Yes­ter­day at 1345 GMT, US bench­mark West Texas In­ter­me­di­ate was down $1.06 on the day at $50.73, while Brent North Sea crude had dropped 93 cents to $54.01.

With crude prices above $50 dol­lars, US shale oil pro­duc­ers are dust­ing off dor­mant oil rigs as they gear up to raise pro­duc­tion which could lessen the im­pact of any OPEC cuts. “The price ac­tion speaks to me of a mar­ket that lacks con­vic­tion and mo­men­tum,” said OANDA se­nior mar­ket an­a­lyst Jef­frey Hal­ley. “As re­al­ity bites in a world awash with oil, pro­duc­ing coun­tries will have to show some mean­ing­ful back­bone on com­pli­ance, for prob­a­bly the first time ever, to achieve the mean­ing­ful rally in oil prices that they so de­sire.” Some an­a­lysts say that last week’s deal will likely be fi­nalised at Satur­day’s meet­ing but doubts over its im­ple­men­ta­tion re­main.

“Re­ports that the group once again in­creased out­put in Novem­ber will raise fresh skep­ti­cism,” an­a­lysts from Ac­cendo Mar­kets said. Com­merzbank an­a­lyst Carsten Fritsch said that with Saudi Ara­bia try­ing to de­fend its mar­ket share, “it is hard to imag­ine how OPEC will con­vince nonOPEC pro­duc­ers to cut pro­duc­tion”.

No­vak has called on Rus­sia’s oil com­pa­nies to slash out­put to com­ply with the de­ci­sion. Deputy En­ergy Min­is­ter Kir­ill Molodtsov told Rus­sian news agen­cies that the coun­try’s oil com­pa­nies would con­vene Wed­nes­day for a meet­ing. By cut­ting 300,000 bar­rels a day, Rus­sian will pro­duce some 10.9 mil­lion bar­rels a day-a fig­ure higher than when Rus­sia had at­tempted to agree on a pro­duc­tion freeze with OPEC mem­bers in the spring.

Emily Stromquist of Eura­sia Group said Rus­sia’s com­mit­ment to slash­ing its pro­duc­tion “should be viewed with skep­ti­cism.” Af­ter the first quar­ter of 2017, “Rus­sia is likely to as­sume a flex­i­ble in­ter­pre­ta­tion of its en­gage­ment and de­liver only a por­tion of this 300,000 bpd cut in the best case sce­nario,” Stromquist said. The slide in oil prices and Western sanc­tions over Moscow’s role in the Ukraine cri­sis have pum­meled the Rus­sian econ­omy. — AFP

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