Con­sen­sus in sight as OPEC, al­lies hold cru­cial talks de­spite Rus­sia’s price com­ment

Business a.m. - - ENERGY, POWER & RENEWABLES - Sto­ries Bukola Od­u­fade

THE ORGANISA TION OF PETRO LEUM EX­PORT ING Coun­tries (OPEC) and its non-OPEC al­lies have a lot to iron out this week in Vi­enna as Rus­sian oil min­is­ter com­mented that the cur­rent oil prices were com­fort­able, de­spite all indi­ca­tions point­ing to a pro­duc­tion cut.

Khalid al-Falih, Saudi Ara­bian en­ergy min­is­ter had ear­lier said that OPEC and its al­lies must take a “col­lec­tive de­ci­sion” as a re­sult of the re­cent down­turn in oil prices in or­der to balance the global oil mar­kets. His Rus­sian coun­ter­part, Alexan­der No­vak, how­ever said that the cur­rent price range of oil is com­fort­able for both pro­duc­ers and con­sumers.

De­spite agree­abil­ity of cur­rent oil prices with Rus­sia, Reuters re­ported that it still a fresh Saudi-led oil pro­duc­tion cut, but is still bar­gain­ing with its key part­ner in OPEC over how much, how fast, and for how long it would po­ten­tially re­duce its oil out­put.

“Peo­ple know leav­ing the mar­ket to its own de­vices with no clar­ity or no col­lec­tive de­ci­sion to balance the mar­ket is un­healthy,” said Falih. “We’ve seen that in ac­tion in the last three weeks.”

An­a­lysts are of the opin­ion that the car­tel would cut pro­duc­tion to prop up oil prices, as OPEC and 10 non­duc­tion OPEC al­lies led by Rus­sia will hold their reg­u­larly sched­uled meet­ing on De­cem­ber 6-7 in Vi­enna to dis­cuss out­put pol­icy for 2019.

An­a­lysts at La­gos-based United Cap­i­tal said in its weekly re­port: “The like­li­hood of a sig­nif­i­cant pro­sup­ports cut by OPEC and its al­lies seems high in our view amid ef­forts to re­bal­ance the oil mar­ket.”

Falih had ear­lier stressed that Saudi Ara­bia can­not act alone and that it needs the sup­port of the other OPEC and non-OPEC pro­duc­ers that have been jointly co­or­di­nat­ing their pro­duc­tion strate­gies over the past two years. The min­is­ter added that he was con­fi­dent that the group would do the “right thing.”

“Over the last week we had bi­lat­eral con­sul­ta­tions with Iraq, Libya, Rus­sia, all that will lead us to reach a con­sen­sus,” Falih said. “I am con­fi­dent that we will do the right thing to sta­bi­lize the mar­ket, and give pro­duc­ers and con­sumers the com­fort that 2019 is go­ing to be a year of a very sta­ble oil mar­ket.”

Oil prices ex­pe­ri­enced their largest weekly plunge since early-2016, with Brent crude fu­tures slid­ing be­low $60 per bar­rel to the low­est point since Oc­to­ber 2017.

Af­ter peak­ing above $86 per bar­rel on Oc­to­ber 3, the oil mar­ket has been in a tail­spin, with the US, Saudi Ara­bia and Rus­sia all pump­ing at close to record high lev­els.

“Im­por­tant as Saudi Ara­bia is, we can­not do it alone, we [are] go­ing to work within a group of 25 coun­tries,” he said dur­ing his meet­ing with Em­manuel Kachikwu, Nige­rian oil min­is­ter. “The sig­nals that I get is that ev­ery­body is long­ing to reach­ing a de­ci­sion that will bring sta­bil­ity back to the oil mar­ket.”

An OPEC/non-OPEC mon­i­tor­ing com­mit­tee cochaired by Falih has hinted that the coali­tion would con­sider pro­duc­tion cuts of up to 1.4 mil­lion bar­rels per day to balance the mar­ket.

Falih ad­mit­ted that the oil mar­ket had gone through a pe­riod of “great volatil­ity” in the past few weeks, which had also been “am­pli­fied by geopo­lit­i­cal ten­sions” and driven by “spec­u­la­tion” by fi­nan­cial in­vestors.

Re­lat­edly, in­creas­ing shale pro­duc­tion ow­ing to eas­ing pipe­line con­straints buoyed global sup­ply with fore­casts un­der­scor­ing it could reach a high of 12.0 mil­lion bar­rels per day in 2019.

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