OPEC seeks cuts from non-mem­bers

Qatar eyes deal in Vi­enna as Rus­sia prom­ises to ful­fill com­mit­ment

Kuwait Times - - BUSINESS -

VI­ENNA:

OPEC of­fi­cials met yes­ter­day with Rus­sia and other oil pro­duc­ers to try to per­suade them to lower pro­duc­tion un­der a pact to stem a global glut and lift prices.

The talks, tak­ing place at the oil car­tel’s head­quar­ters in Vi­enna, aim to nail down de­tails on an ac­cord reached late last month. The Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries (OPEC) agreed on Novem­ber 30 to lower its monthly out­put by 1.2 mil­lion bar­rels per day (bpd) to 32.5 mil­lion bpd from Jan­uary. Un­der the deal, OPEC also wants oil-pro­duc­ing na­tions out­side the group to lower their out­put by 600,000 bar­rels a day.

Ar­riv­ing shortly be­fore the start of the one­day talks, car­tel chief Mo­hammed Barkindo of Nige­ria spoke pos­i­tively about reach­ing an agree­ment to cut out­put by 600,000 bpd “and even more”. “This is a very his­toric meet­ing due to the pres­ence of OPEC and non-OPEC mem­bers,” he said.

“The po­lit­i­cal at­mos­phere has changed.” Moscow-the world’s largest oil pro­ducer along with OPEC king­pin Saudi Ara­bia-has al­ready sig­nalled it would pro­vide half of that pro­duc­tion cut in the first half of 2017.

Speak­ing to re­porters, Rus­sian En­ergy Min­is­ter Alexander No­vak said Moscow would ful­fil its com­mit­ment. “We have stated our obli­ga­tions and will abide by the fig­ures we have talked about,” he was quoted as say­ing by Rus­sia’s In­ter­fax news agency.

Deal ex­pected

Qatari En­ergy Min­is­ter Mo­hamed Al-Sada, whose coun­try cur­rently holds the OPEC ro­tat­ing pres­i­dency, de­scribed yes­ter­day’s meet­ing as “vi­tal for all pro­duc­ing coun­tries, in­dus­try and the world econ­omy.” Oil prices climbed Fri­day as hopes grew of a deal. In late Euro­pean busi­ness, West Texas In­ter­me­di­ate (WTI) crude stood at $51.44, 60 cents up on the day, while Brent rose 20 cents to $54.09.

Of the 14 in­vited coun­tries, 10 are ex­pected to at­tend Saturday, ac­cord­ing to the Bloomberg news agency. Some an­a­lysts were op­ti­mistic that de­tails of the deal would be fi­nalised.

“We ex­pect the meet­ing be­tween OPEC and non-OPEC pro­duc­ers to re­sult in a cred­i­ble doc­u­ment, which we think will be sup­port­ive for prices,” said Bjarne Schiel­d­rop, chief com­modi­ties an­a­lyst at top Nordic cor­po­rate bank SEB. The Novem­ber agree­ment ended weeks of un­cer­tainty and volatil­ity on crude mar­kets, push­ing prices above $50 for the first time in a month.

It also rep­re­sented a dra­matic re­ver­sal from OPEC’s Saudi-led game plan, in­tro­duced in 2014, of flood­ing the mar­ket to force out ri­vals, in par­tic­u­lar US shale oil pro­duc­ers. The strat­egy saw pro­duc­tion out­strip de­mand, caus­ing prices to plunge from more than $100 a bar­rel in June 2014 to near 13-year lows be­low $30 ear­lier this year.

Lit­tle im­me­di­ate re­duc­tion

OPEC now seeks a global cut of 1.8 mil­lion bar­rels a day to help re­bal­ance the mar­ket. The group-which pro­duces around 40 per­cent of the world’s crude-needs non-OPEC mem­bers to join the cuts in order to drain cur­rent stock­piles. But Bloomberg cal­cu­la­tions, based on OPEC data, in­di­cated there would be lit­tle over­all re­duc­tion in record oil in­ven­to­ries in 2017 — even if OPEC can con­vince non-mem­bers to come on­board.

“Non-OPEC pro­duc­ers, such as Mex­ico, Azer­bai­jan and Colom­bia, are likely to dress up in­vol­un­tary pro­duc­tion de­clines, al­ready fac­tored in by traders, as cuts,” ac­cord­ing to Bloomberg. In ad­di­tion, Mex­ico and Kaza­khstan plan to ramp up their crude pro­duc­tion next year. Rus­sia an­nounced Wed­nes­day that na­tional oil com­pa­nies backed cuts of 300,000 bpd but news agen­cies quoted Lukoil chief ex­ec­u­tive Vagit Alekperov as say­ing “No de­ci­sion was made.”

The slide in oil prices and West­ern sanc­tions over Moscow’s role in the Ukraine cri­sis have pum­melled the Rus­sian econ­omy. “For now we are not as­sum­ing that Rus­sia will de­liver on the promised cuts but we are ready to change this as­sump­tion if we see lower ex­ports com­ing out of Rus­sia,” said DNB Mar­kets on Fri­day. —AFP

VI­ENNA: Per­sons stand out­side the head­quar­ters of the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries, OPEC, in Vi­enna yes­ter­day. —AP

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