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