EMEA News
Discord and Discontent Over Crude Cutbacks Growing in Advance of OPEC Meeting
With eight days left before the Organization of the Petroleum Exporting Countries (OPEC) convenes in Vienna to discuss whether to extend its crude cutbacks through 2018, a private briefing to members has revealed that nobody knows whether an extension will trigger a new wave of supply from the U.S. - or whether this will lead to another global glut.
People with knowledge of the briefing told Bloomberg that veteran crude trader Andy Hall participated in the event and stated that the U.S. Energy Information Administration is underestimating this year's growth in shale oil by about 300,000 barrels per day (bpd).
Other participants included Per Magnus Nysveen, head of analysis at Rystad Energy AS; Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd.; and analysts from Citigroup Inc. and Morgan Stanley - and while they reportedly delivered different figures, they agreed that rapid shale expansion is a persistent phenomenon.
While media opinion about OPEC's likelihood of extending its cutbacks as well as the efficacy of those cutbacks seems to change daily, reports of the private meeting was accompanied on Thursday by more news that all seems not well within the cartel's ranks: sources told Reuters that there has been no official contact on oil policy between the Gulf Arab nations of the Gulf Cooperation Council (GCC), which includes Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar as well as non-OPEC Oman and Bahrain, partly due to rifts between the countries.
A source said, "The ministers can't meet: they may relay the message through the Kuwaiti or the Omani oil ministers, but Saudi and the UAE cannot meet publicly with the Qataris."
What this means is Gulf ministers will have to scrap their tradition of meeting behind closed doors to agree on matters before OPEC holds its Vienna meeting - thus presumably having implications for OPEC policies.
More discord on Thursday came from Maxim Oreshkin, economy minister for Russia, who said, "Because of the OPEC deal we have a negative direct impact from oil production, as well as indirect effects related to low investment activity due to production limits."
Chris Weafer, a senior partner at Moscow-based Macro-Advisory, pointed out in a note that "if oil stays in the $60-$65 range or higher, Russia will likely not support a cutback extension for fear the spike would be followed by a damaging fall.
But it's anyone's guess if anything will come from the November 30 Vienna meeting anyway: Reuters notes that a draft agenda for the OPEC talks includes three hours to discuss the extension, and that this amount of time "would be a short meeting by the standards of OPEC, whose gatherings have in the past sometimes stretched into the early hours of the morning as ministers argued about policy."
Earlier this week decidedly mixed messages were being sent about the need for the cutbacks to continue, with the Saudis continuing their push for a nine month extension and Venezuela's oil minister stating that the market has finally found a balance and inventories are declining.
