EMEA News
OPEC Extension Will Happen But Forget a Price Breakout, Says Blue Line
Although doubt has been growing in many quarters that the Organization of the Petroleum Exporting Countries (OPEC) will announce an extension through to the end of 2018 for its crude cutback initiative, at least one respected analyst is betting the deal will be sealed on November 30 - just don't expect breakout prices as a result, he warns.
Bill Baruch, president of Blue Line Futures, told Bloomberg television that with regards to reports that Russia will reject the extension, thus rendering the deal vulnerable to a premature collapse, "I believe Russia is just flexing its muscles right now; they want to show that they're in control of what they want to do.
"But they're ultimately going to join forces with OPEC, I believe there is no doubt that this deal will happen; however, this production deal will be completely priced in and I don't think we'll get any bullish surprises, and that is why I think a lot of the longs will start to liquidate and you'll start to see a waterfall effect back down."
He concluded, "I am very bullish this week in heading into that OPEC meeting."
Meanwhile, the United Arab Emirates revealed that while OPEC is talking about prolonging production curbs when its members meet at the end of the month, it won't discuss what many experts think is vital if the extension is to have any meaningful positive impact on supply and demand balance: that is, it won't discuss any increase in the size of the cuts.
This is the contention of Al Mazrouei, energy minister for the UAE, who also told reporters in Abu Dhabi, "Judging from the current situation, I see a need for extending the agreement" - a reference to the fact that about 158 million barrels in surplus oil inventories still need to be cleared.
He added that he doesn't think it will be hard to reach a deal: "It's logical to extend -- everyone is gaining."
While many Middle Eastern countries, led by Saudi Arabia, are pushing for an extension because any resulting higher prices would help their economies, Macro-Advisory last week suggested that Russia rejecting any extension would make sense for that country, because a weaker ruble - which occurs with oil closer to the $50s than the $60s - would allow it to continue diversifying its economy away from oil dependency.
