EMEA News
Crude Up On Positive Cutback Rumours - But OPEC Omits Details About How It Will Win Over Reluctant Members
Another day closer to the Organization of the Petroleum Exporting Countries (OPEC) global cutback deal ratification in Vienna, another day of traders acting upon sentiment, this time causing Brent and West Texas Intermediate Friday to rise 37 cents to $46.86 and 27 cents to $45.69 per barrel respectively, on the strength of Algeria's energy minister stating he's more optimistic about ratification after discussions between the cartel and Russia.
Noureddine Boutarfa told reporters after the talks in Doha that, "We won't turn back on the decision made in September in Algeria: all the countries, 11 present in today's meeting, agreed to support the Algiers accord."
The resulting oil price increases were despite a stronger dollar and a report from Baker Hughes that the U.S. rig count rose in the last week by 19 to 471 rigs – the largest weekly rise since a recovery began at the end of June.
Traders are also presumably buoyed by Friday's news that OPEC asked Iran to participate in the cutback deal by capping its oil output at 3.92 million barrels per day (bpd), and that so far the Islamic republic has not turned down the offer.
Yet more flimsy optimism concerning the ratification meeting on November 30 came from Russia, which indicated that if the Iranians accept OPEC's offer, it would agree to cap its own output from six months or more.
One problem with these reports as pointed out by Bloomberg is that OPEC has omitted crucial details about how it will resolve Iraq's resistance in making cuts; also, Russia has only agreed to cap and not cut production, which is now at record levels.
The conspicuous absence of incendiary criticism that previously came from the analytical community in reaction to what is widely considered to be a minuscule cutback deal has been replaced by a decidedly more conciliatory tone: for example, David Lennox, resources analyst for Fat Prophets, on Friday told CNBC that "They do have to put some ceiling in place to contain production."
When asked what was required to achieve "a manageable surplus," Lennox replied that OPEC members need to remove 1 million bpd from the market.
The hyperbole mounting in advance of Vienna is especially baffling considering that members such as Saudi Arabia have spent most of the year ramping up production significantly: the latest news of Saudi activity came this week, when it was disclosed that the kingdom's crude oil exports rose to 7.812 bpd in September, an increase of 507,000 bpd versus August.
The Saudis also produced slightly more crude - 10.65 million bpd in September – compared to August's 10.63 million bpd.
