Saudis Maintain Push for Cutback Extension As Other Producers Claim the Market Has Been Rebalanced

With so much conflicting data from so many sources, the true state of the global crude supply/demand balance remains unclear at best, and with the latest round of seemingly contradictory actions from Organization of the Petroleum Exporting Countries (OPEC) members, it appears that the group charged with rectifying that balance is unsure of its true status as well.

On one hand, Reuters reports that Saudi Arabia is lobbying oil ministers to agree next week on a nine-month extension to OPEC's crude cutback initiative, according to sources familiar with the matter.

A senior oil industry source said, "The Saudis are lobbying to have a decision in November for nine months", and this follows Saudi crown prince Mohammad bin Salman signaling his support of an extension further into 2018.

On the other hand, Eulogio Del Pino, oil minister for Venezuela, on Wednesday said the oil market has finally found a balance and inventories are declining; he was speaking in Santa Cruz, Bolivia, at the Gas Exporting Countries Forum, where he also put the optimal price for crude at between $60 and $70 per barrel to encourage investment.

Taking the middle ground at the same forum, Mohammed al-Sada, oil minister for Qatar, agreed that OPEC has been successful in bringing global oil inventories closer to their five-year average; however, he said on the sidelines that "In my view, an extension of the agreement will help us in stabilizing the market."

Of course, contradictory stances have not only occurred between members, but within countries, a case in point being Russia, whose president Vladimir Putin recently signaled his support of a cutback extension but whose energy minister Alexander Novak said any consideration of one was premature.

But arguably, the uncertainty of the market's true condition is entirely appropriate given the uncertainty in analytical circles about the efficacy of OPEC's cutbacks to date and what impact an extension will have: opinions have ranged from worry that an extension will drive up prices and cause U.S. shale to flood the market all over again, to prices remaining range bound because traders have already priced in an extension, to the contention that countries such as Russia would be better off quitting the deal because it would be better for their economy.