EMEA News
Qatar/Glencore/Rosneft Deal Heralds Revitalized OPEC Influence Via Ties With Russia: Analysts
The price rally caused by the Organization of the Petroleum Exporting Countries' (OPEC) output reduction deal ratification may have stumbled due to doubt the cartel will follow through on its promises, but the ratification has led to a new business deal that reflects the cartel's tightening and unlikely relationship with Russia.
On Wednesday, OPEC member Qatar and commodity trader Glencore committed to buy a 19.5 percent stake in Russian oil giant Rosneft for 10.2 billion euros ($11 billion).
This follows the announcement last week that Russia would join OPEC in its bid to reduce production by agreeing to a 300,000 barrel per day (bpd) cut for the first six months of 2017.
The deal, which is the largest to date in Russia's plan to privatize its economy, will enable the country to retain control over the company; in a statement, Glencore said the bulk of funding would come from the Qatari sovereign-wealth fund and non-recourse bank lending.
While the deal will give Glencore a five-year contract to take an extra 220,000 bpd of crude, The Economist pointed out that the company "will also have to take account [the] tentative agreement between Russia and OPEC ... to cut Russia's production by 300,000 bpd."
Ayham Kamel, director of Middle East and North Africa analysis for Eurasia Group, noted, "There's an intentional effort by Middle East producers like Saudi Arabia, Qatar, and the United Arab Emirates to strengthen coordination with Russia; that's an emerging and important trend."
Olivier Jakob, managing director of Petromatrix, added that even the Gulf Arab states and Russia backing opposite sides in the Syrian civil war hasn't prevented them from being able to "tighten the relationship."
Johannes Benigni, founder of JBC Energy, thinks that if all OPEC countries abide by the output deal, then "we have a more powerful game: when OPEC meets and wants to do something, they ask Russia too; there's a new era."
Unsurprisingly, OPEC members are calling for a renewed spirit of cooperation in ensuring that the deal is a success: Hassan Rouhani, president of Iran, said on Thursday that "Close cooperation among OPEC and non-OPEC countries is key to stabilizing the oil prices and their increase.
"It will pave the way for implementation of deals reached during meetings in Algiers and Vienna this year."
But Robert McNally, founder and president of Rapidan Group, expressed sentiments held by many analysts when he told CNBC, "My sense is the fear factor is not strong enough to get countries to do anything but promise cuts that they never intend to make."
However, the doubts weren't enough to stop crude from an upward market climb: oil on Thursday rebounded from its losses earlier in the week, with Brent gaining 35 cents and settling at $53.35 per barrel.
Earlier this week, Chris Gersch, director of strategy for Bell Curve Capital, said Russia's willingness to follow through with its cuts – as well as the OPEC cutback deal in general – was not to be taken seriously: "OPEC makes these rules and they can't even enforce them; I mean, come on, all these traders know OPEC can't enforce these rules – and Russia cutting 300,000 barrels? That's a joke.
"You think they're going to let the U.S. pick up all that production? I don't think so."
