EMEA News
OPEC Said to Favour 9 Month Oil Deal Extension, But Total Boss Says 2 Years is Required
Just as the Organization of the Petroleum Exporting Countries (OPEC) is said to be favouring a nine month extension of its crude cutback initiative, at least one industry insider - Total - is arguing that cutbacks of no less than two years will be necessary if the market is to achieve true rebalance.
Patrick Pouyanne, chairman and chief executive of the French oil giant, told a London conference on Wednesday, "When you have three of four years of oversupply it takes time to rebalance the market."
Although he agreed the market is beginning to rebalance and there is strong demand brewing, he noted that "markets are volatile but mindsets are also volatile," and that "time is important" for a full market recovery.
Pouyanne reminded his audience that his sentiment is hardly new: "I said in January, right after the agreement when I was in Abu Dhabi, [that] if really the OPEC and non-OPEC agreement has to have an effect it should last for at least two years.
"I will still reiterate that."
Although not expressed openly by other experts, those who have been unimpressed by OPEC's feel-good rhetoric in 2017 and worried about the sheer scale of the global glut may agree with Pouyanne's assessment; and in that context, OPEC members reportedly forming a consensus around extending their production cut deal by nine months seems ineffectual - even if earlier this year the sentiment was that an extension of several months would do the trick.
Three sources told Reuters that OPEC is leaning towards the longer extension, but they added that the cartel may not agree to it at its next policy meeting in November; instead, they may wait until early next year to make a decision.
For its part, Iran supports such an extension: Amir Zamaninia, deputy minister for trade and international affairs for the Islamic republic's oil ministry, said, "We are pleased with the way OPEC has decided to cut some production in order to bring a semblance of balance between supply and demand.
"We think that this trend will continue and we will support this trend."
Iran was the only OPEC member allowed to increase rather than decrease its oil production, to 3.797 million barrels per day (bpd) under the agreement; it is currently exceeding that amount with an output of between 3.8 and 3.9 million bpd.
Presumably, a nine month extension would please Fatih Birol, executive director of the International Energy Agency, which last week stated that the global glut would be cleared next year but then backpedaled by citing everything from the huge amount of existing stockpiles to increased production as making that scenario unlikely.
