EMEA News
Friday Could Mean Curtains For OPEC As We Know It: Kilduff
As the week kicked off with analysts around the world anticipating the Organization of the Petroleum Exporting Countries' (OPEC) meeting on Vienna to decide whether or not to raise production to compensate for shortages from Venezuela and Iran, John Kilduff, founding partner at Again Capital, stated what many experts fear might happen but are reluctant to admit openly: a complete collapse of the cartel.
Kilduff prefaced his remarks by telling CNBC that the best thing Saudi Arabia has been able to do of late is get Russia into its fold, and as such Russia has been "pushing hard" over the past year to produce more oil, for a simple reason "they want to grow."
However, he added that the Russian talk about OPEC possibly upping its output by 1.5 million barrels per day (bpd)"cut the legs out from under the [price] rally...it's been quite a freefall."
Kilduff then went on to muse that the meeting in Vienna this Friday is going to be fascinating, "because it could be the end of OPEC as we know it, because Venezuela, Iraq, and Iran have all gone on record as saying they do not want an increase, whereas the Saudis are trying to play the middle and the Russians are pressing them all to put more oil on the market.
"So the [output] agreement could at the very least come to an end; we'll have to see what happens with OPEC."
While many experts have predicted the demise of the cartel only to be proven spectacularly wrong, Hossein Kazempour Ardebili, Iran's representative to the bloc, told Bloomberg that the Islamic republic along with Venezuela and Iraq will indeed stop any move to relax the OPEC production restrictions: "If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity; if the two want to act alone, that's a breach of the cooperation agreement."
He added, "The market is well-supplied, and OPEC should abide by its decision up to the end of the year; I am confident many other OPEC members feel and act the same."
Bloomberg noted dryly, "Iran's comments show that OPEC members are set to clash when they meet later this week in Vienna."
In an apparent attempt to remain neutral, Suhail Al- Mazrouei, energy minister for the United Arab Emirates and president of OPEC, issued a statement on Monday declaring that the oil market is moving closer to rebalancing; he also said he acknowledged concerns expressed by some countries regarding potential shortages in the global oil market.
But in a sector where analysts can't seem to agree if we run the risk of incurring crude supply shortages or if we're still swimming in oil, it's almost impossible to answer the key question surrounding the Friday OPEC meeting: is it doing the right thing for fundamentals if it lifts the restrictions?
Platts, in culling the opinion of a diverse group of professionals, leans towards the notion that an output hike is inevitable and that a boost of over 1 million bpd is required to keep the global market balanced over the coming 18 months.
In fact, the news agency points out that with the impact of Venezuela and Iran combined with OPEC expecting global demand to average 2 million bpd higher in the second half of 2018 than in first six months of the year, "the figures suggest OPEC may need to consider making a larger rather than a more modest upward adjustment to production."
Earlier this month, Eugene Weinberg, head of commodity research at Commerzbank, predicted that the impending congregation in Vienna "might be one of the worst OPEC meetings since 2011" due to infighting, and he added that "whether an agreement will be possible in this situation is questionable."
