EMEA News
Lack of Clear Plan For Oil Deal Extension Turns Talk of Consensus to Uncertainty
More rumour that the Organization of the Petroleum Exporting Countries (OPEC) may not agree to extend its crude cutback initiative when the cartel convenes in Vienna on November 30 comes in the form of Russia not convinced that the deal should be extended.
Two people with knowledge of the matter told Bloomberg that the former Soviet Union believes it's too early to announce a possible extension at the group's producer meeting and has not reached a consensus with the nation's oil companies about the matter.
This caused Nick Holmes, an analyst at Tortoise Capital Advisors LLC, to note that "It sounds like there is some discourse between OPEC and non-OPEC in terms of not committing to something at the end of the month, and maybe kicking the can down the road."
But this report directly conflicts with Russia's energy ministry on Wednesday stating that it has met with the the country's domestic oil producers, and they are committed to the deal.
For the record, Lukoil said last month that the deal should end if oil prices reach $60 per barrel, while Rosneft complained that U.S. shale is undermining OPEC's efforts.
Nail Maganov, CEO of Tatneft, said after the energy ministry's meeting that cooperation with OPEC is "fruitful" and that "it is necessary to continue both monitoring and discussions; in a week we will meet and discuss."
Even more disturbing than the mixed signals emanating from Russia are allegations that OPEC is heading into the Vienna meetings with no clear idea how to extend the cuts: Bloomberg believes the indecision stems from a huge divergence in forecasts for 2018, with some experts saying bloated fuel stockpiles are shrinking, and others stating that the glut is still unmanageable.
Indeed, the International Energy Agency speculated that warmer weather cutting consumption will cause global oil demand growth to increase more slowly in coming months, thus tilting the market back into surplus in the first half of 2018.
Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA, warned that "Any postponement in deciding a supply-cut extension, or even a disappointment relative to the duration of an extension, can easily lead to unraveling of speculative length on futures and a price correction."
A minor price correction occurred on Wednesday for reasons not involving OPEC: specifically, the crude build of 1.9 million barrels reported by the Energy Information Administration earlier this week combined with the IEA's forecast of slowing demand growth continued to bother traders, who caused West Texas Intermediate to drop 37 cents to $55.33 per barrel and Brent to drop 38 cents to $61.83.
Earlier this week, Michael Loewen, a commodities strategist at Scotiabank, said that if you add up all the data, "it shows that we are going to be a little but oversupplied," and he added that with regards to the market "we rallied too far, too quick."
