EMEA News
Russia Swipe At OPEC Deal Causes Price Drop; Petroleo Official Says Cap Will Be Rejected By Outsiders
A Friday oil price plunge due to Russia declaring it won't buy into the Organization of the Petroleum Exporting Countries' (OPEC) output cap deal this week, combined with a Petroleo Brasileiro SA official saying non-members won't buy into the cap either, seems to indicate one thing: the cartel is powerless to manage the international market in a meaningful way.
Brent for December settlement fell 58 cents to $51.83 per barrel and West Texas Intermediate for November delivery slipped 63 cents to $49.81 per barrel following a remark made by Alexander Novak, energy minister for Russia, that he doesn't expect to sign a deal with OPEC during the World Energy Congress this week in Istanbul – even though he called the meeting an "important step toward reaching an agreement on capping oil production."
The ministry views a possible deal being reached by the time the group meets in Vienna.
Meanwhile, the Petroleo official who spoke to Reuters on condition of anonymity said that even if OPEC requested other countries to join its proposal to limit crude output, "it would be very hard for non-OPEC nations like Brazil to accept it; it would not make much sense."
For the record, Mohammad Barkindo, secretary general for OPEC, told the press this week that this is exactly what the cartel is planning to do.
The Petroleo official supported his position by pointing out that "The market changed and the decision power also changed between groups .... U.S. and Russia are stronger, particularly the U.S. due to shale."
It fell upon the ever-optimistic Nigeria to defend OPEC, by way of Kemi Adeosun, finance minister for that country, telling CNBC, "I'm quite confident...there is a commitment towards stability and I think it will hold."
Friday's news compelled Tamas Varga, an analyst at PVM Oil Associates Ltd., to remark, "Talks, talks, and talks - that has been the baseline over the last week or so; there's no practical indication that OPEC will finally agree, meaningfully and credibly, to cut production at the end of the November meeting."
But the Petroleo official's insinuation of OPEC's waning influence is arguably the more important message going into this week's Istanbul conference, and it is one shared by many experts, starting with RBC Capital Markets, which has repeatedly noted that five of OPEC's key member countries are facing economic collapse and that Mohammed Bin Salman, deputy crown prince of Saudi Arabia, may even regard the cartel as "a retrograde institution".
Too, Igor Sechin, CEO of Rosneft, has gone on record as stating that OPEC no longer has the ability to influence oil prices and has "practically stopped existing" as a united organization.
