EMEA News
Oil Producers Already Plotting 2019 Output Deal
If nothing else, the Organization of the Petroleum Exporting Countries (OPEC) has a knack for staying in the spotlight: no sooner did it cause analytical fomentation and headlines with its Vienna summit last week than its ally, Russia, disclosed that the cartel is about to sign onto a new crude output deal, this time for 2019.
Alexander Novak, energy minister for the former Soviet Union, told CNBC immediately after OPEC agreed to boost production that "We are planning to sign a new agreement by the end of this year; the conceptual framework of that agreement was shared with all the participants of today's ministerial meeting, so that they could study it and make any amendments."
He added that the new agreement "will, to a large part, be based on the monitoring of the market situation, on the creation and institutionalization of the governing body and the ability to take measures, if necessary, as was done in 2016."
As for the deal to raise output by 1 million barrels per day (bpd) this year to offset shortages from Iran and Venezuela, Novak believed the figure "should be sufficient."
Russia is rapidly emerging as a vocal booster of OPEC: on Monday Kirill Dmitriev, the head of the Russian Direct Investment Fund (RDIF), told Reuters that the cartel's decision to raise output demonstrates the strength of the alliance between his country and de facto OPEC leader Saudi Arabia.
However, Dmitriev's enthusiasm is not for OPEC per se, but for what is being called OPEC+, headed by Russia and the Saudis, and which during OPEC's Vienna meeting both parties agreed should be institutionalized to monitor the market and change output if required.
He said, "A long-term partnership between Russia and Saudi Arabia related to the coordination of efforts between oil producers and the future creation of a new organization based on OPEC+ will help to overcome disagreements between the producers and work out a united action strategy on the global markets."
He added that the alliance "will ensure pricing stability on global markets and increase investments in the energy sector."
It's unclear how OPEC+ would operate and how it would interact, if at all, with its OPEC parent; one thing is certain, though: oil giant Saudi Aramco has spare capacity of 2 million bpd and can meet additional oil demand in case of any interruption in supplies.
Amin Nasser, the company's chief executive, made this disclosure on Monday and added that "Whatever is concluded as part of this [OPEC output increase] agreement, we will fulfill."
News last week of the possibility of an OPEC+ caused pundits to point out that it would have the advantage of diminishing the influence of Saudi's rival, Iran, in the Middle East, and generally cause a seismic shift in the oil market's future.
