EMEA News
Russia Supports Oil Cuts into 2018, But Bloomberg Says So Far The U.S. Is The True Victor of the Cutbacks
With the Organization of the Petroleum Exporting Countries (OPEC) now working to extend its troubled oil cutback initiative to the end of this year and possibly through 2018, the market on Monday responded mildly positive on news that Russia too is willing to support extending the deal beyond 2017.
West Texas Intermediate rose 21 cents to settle at $46.43 per barrel, while Brent climbed 24 cents to end the session at $49.34 per barrel; while this was an improvement over last week's rout that eliminated the gains made when OPEC first announced its initiative last November, oil is still down about 14 percent for the year.
Still, at a point where even the slightest perception of good news is welcome by investors and analysts, Russia's willingness to support OPEC's objective is noteworthy; "We are discussing a number of scenarios and believe extension for a longer period will help speed up market," declared Alexander Novak, that country's energy minister, in a statement.
Michael Lynch, president of Strategic Energy & Economic Research, said the comment combined with earlier news that Saudi Arabia is confident the extended cutback deal will be ratified, means "very minor bullish pressure: if they come up with some kind of formal agreement and other countries sign off on it, that would be more meaningful."
Another voice of cautious optimism was that of Bart Melek, the head of global commodity strategy at TD Securities, who said, "Until it's done and we start seeing it in inventory data form in the real world, traders aren't going to get overly excited about this."
But Javier Blas, reporter for Bloomberg News, thinks OPEC and its allies' comparatively rapid change of stance from initially saying no extension to the end of 2017 would be needed to pushing for extensions into 2018 indicates that "the fight between OPEC, Russia, and the U.S. shale producers is intensifying, and so far it's America who is winning."
Blas added that Iran appears to be playing along because "it only agreed to freeze production to what they can actually can produce"; based on input from other experts, he believes that "2018 could be a very difficult year for OPEC, with shale producers bringing down an anchor price "more towards $40 than $50."
It's also worth noting, as did Lynch, that despite the Saudis and Russia making headlines with their comments, no official consensus has yet been reached: indeed, ministers from some OPEC countries who have discussed the possibility of deepening their output cuts told Bloomberg that their discussions have not resulted in any kind of agreement to make deeper cuts.
Earlier on Monday, Khalid al-Falih, energy minister for the Saudis, told reporters that "the producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average."
