Norway wants to be pioneer in electric planes

Western Europe’s largest exporter of oil and gas has pledged to cut emissions of greenhouse gases by 40% by 2030. About half of all new cars sold there are electric, and battery-powered ferry boats are also being built, and the thrust to electric planes should cut emissions further, though environmentalists are sceptical |

In December 2016, Opec and a group of non-Opec producers, led by Russia, agreed on a Declaration of Cooperation to stabilise the oil market after prices in January that year fell below $30 a barrel. The agreement stipulated a reduction by 1.8 million barrels a day for 2017 and was later extended to the end of 2018, with a provision for a review this month.

There was no definition or a target agreed as to when the market is in balance and the surplus supply is wiped out. However, the level of oil stocks in the IEA countries was generally taken as an indicator to see how the agreement is performing. This objective has been largely met and stocks in the IEA countries are well below their last five-year average. And if things continue this way, they could be drastically below that target.

As for prices, the agreement has done wonders. Just the anticipation of one pushed prices to over $50 by December 2017 and the price of Brent crude oil now is $73.22 from just above $80 a few weeks earlier.

The market has been helped by other factors, such as a reduction in Venezuela’s production and the unstable and below expected production in Libya and Nigeria. There was also the healthy growth in demand through last year. But there was also large increase in non-Opec production, especially from the US with its rising number of active drilling rigs.

Therefore, at this time of festivities related to Eid Al Fitr and the football World Cup, the producers should congratulate themselves on their achievement. The Opec meeting in about a week’s time, whatever be the outcome, should lay the ground for further cooperation.

But is all this success about to be undone? According to the media, the answer is “Yes”. Collective thinking and decision-making has been the norm throughout the past 18 months. But statements from Saudi Arabia and Russia individually has suggested an easing of the agreement’s goals or abandoning it altogether.

Russia is reported to have already increased production this month to 11.1 million bpd, above the level of 10.95 million agreed to in the agreement. Saudi Arabia too has increased production, but still within its agreed level.

These signals have been taken negatively by the market and Brent prices have zigzagged downward from $80 to $73 in the last three weeks, with the sharp changes driven by statements from here and there. While some Opec members silently agree with Saudi Arabia and Russia in wanting to roll back the agreement, others are openly unhappy about such a prospect.

Many times I have said Opec and its partners should not suddenly abandon agreed production cuts. No matter what, a gradual exit strategy is well advised. The previous statements from Saudi Arabia and Russia are probably opening salvos to gauge the reaction of the market and other producers.

I am encouraged by the latest statement by Khaled Al-Faleh, the Saudi minister, when he said “it was “inevitable” that Opec and its partners would agree next week to gradually roll back production cuts. Later, he was said that the meeting would come up with a decision that would make everybody happy. The key words are “gradually” and “everybody”.