Opec, Russia may extend oil output cooperation

Status of markets more important than political concerns, analysts say

Cooperation between Opec members and Russia in cutting production is likely to continue, despite rising tensions in the Middle East due to the recent bombing of a Syrian airbase by the US military, analysts said.

However, if tensions escalate further, some analysts are of the view that it could have an impact on the continued cooperation with Russia, which is among the largest producers of oil in the world.

On Friday, the US military launched a missile strike against Syria, stoking tensions in the region with US allies and important Opec members Saudi Arabia and the UAE supporting the decision, whereas Russia and Iran issued statements condemning the attack. Russia is backing the current regime of Bashar Al Assad in Syria.

Oil prices rallied by more than two per cent to reach the highest levels in a month following the attack, with international benchmark Brent currently trading at about $55 per barrel.

“Unless the tensions escalate further, we expect cooperation to continue. It is still in the interest of these countries to cooperate to rebalance the oil market, support price and try to drawdown global oil stocks,” Spencer Welch, Opec expert and director at IHS Energy in London told Gulf News.

Deal may be extended

He also said the six month deal reached by Opec members and non-Opec countries led by Russia is likely to be extended beyond June for oil markets to balance.

Thirteen members of the Organisation of Petroleum Exporting Countries (Opec) and 11 non-Opec members agreed to cut production by about 1.8 million barrels a day to prop up oil prices in December last year.

Opec agreed to slash output by 1.2 million barrels a day whereas non-Opec members led by Russia promised to cut 558,000 barrels a day.

Iran was allowed to increase production to pre-sanctions levels of four million barrels per day. Libya and Nigeria were exempted from the deal as their production was hit due to militancy and unrest.

When asked whether Iran would be asked to cut production in the next Opec meeting, he said Iran already has an agreed maximum production level as part of the deal and this is likely to be maintained.

Echoing similar views, Edward Bell, commodity analyst at Emirates NBD said the status of the oil markets is going to be more important issue for oil producing countries than any of the political concerns in the region currently.

“Opec members are going to be really focusing on how to prevent oil price falling further.”