EMEA News
Mixed Messages Over OPEC Oil Extension Sends Crude Prices South
Still more mixed messages regarding whether the Organization of the Petroleum Exporting Countries (OPEC) will extend its production cuts on November 30 - with Nigeria suggesting it's a done deal and the United Arab Emirates saying it is anything but - caused West Texas Intermediate on Wednesday to plummet 69 cents to $57.30 per barrel and Brent to drop 53 cents to $63.08.
The decline was despite a bigger than expected 3.4 million-barrel drawdown in U.S. crude inventories, according to data from the U.S. Energy Information Administration.
While acknowledging the OPEC cuts aren't a done deal yet, Joseph Bozoyan, a portfolio manager at Manulife Asset Management LLC, suggested more market losses could be looming: "The market's expecting OPEC to extend their cuts nine months; if the cuts aren't extended, then you'll probably see a decent decline in oil prices."
A Wednesday meeting of oil ministers in advance of the OPEC summit in Vienna apparently triggered the poor market session, after which Emmanuel Ibe Kachikwu, minister of petroleum resources for Nigeria, told reporters, "I think we left that meeting fairly aligned; obviously we need to bring in the bigger body tomorrow to look over our recommendations that have been made and then go from there."
According to some media sources, Alexander Novak, energy minister for Russia, declined to say whether he supported any extension; but when Kachikwu was asked explicitly whether OPEC members are in agreement but Russia is not aligned with OPEC, he replied, "No, we're all aligned."
Nigeria, incidentally, may be the focus of OPEC scrutiny on Thursday, along with Libya: both countries are said to be the subject of debate on whether they should be obliged to join the second round of cutbacks - if indeed an extension is ratified.
Iraq at the same meeting pushed for a 9 month cutback extension, with that country's oil minister, Jabar al-Luaibi, stating, "So we extend this another nine months, so that means it will end by the end of 2018."
However, he was undercut by Suhail al Mazroui, oil minister for the United Arab Emirates, who dismissed the idea that the Iraqi viewpoint meant an agreement had been reached: "We need to wait for the meeting; and I am optimistic."
Despite Novak's reported tight-mouthed stance, Issam Almarzooq, oil minister for Kuwait, said after the meeting that the major producers - including Saudi Arabia and Russia - recommended extending their supply agreement for six to nine months beyond the current end-March expiry.
Media is partly to blame for sending mixed messages: on one hand CNBC reported that Novak wouldn't say if his country had committed to supporting an extension, but Bloomberg and other sources reported Vienna delegates declaring that all OPEC members and Russia agree the cuts should last until the end of 2018.
However, even if Novak is indeed on board, Bloomberg notes that Igor Sechin, chief executive officer of state-run Rosneft PJSC, and Lukoil PJSC have questioned the wisdom of prolonging the deal when oil prices are already above $60 per barrel.
While the Saudis have long been viewed as the de facto leader of OPEC, Helima Croft, managing director of RBC Capital Markets, earlier this week suggested that Russian president Vladimir Putin will have a bigger influence on the OPEC meeting that the Saudis or any other faction.
