EMEA News
OPEC Pushes for Cutback Extension Consensus on Grounds that Rebalanced Market is at Hand
With a rebalanced crude market said to be in sight, the Organization of the Petroleum Exporting Countries (OPEC) is intensifying its goal of obtaining membership consensus to extend its output reduction deal in advance of its formal November meeting in Vienna.
At least, that was the message delivered on Thursday by Mohammad Barkindo, secretary general for OPEC; however, he said it wasn't clear if the decision to extend for a further nine months would be made on November 30 and suggested that negotiations are in the works to schedule another meeting in early 2018.
He told reporters, "It's difficult to say at the moment what will be decided in November.
"It will depend on a number of factors, chief among which is how far are we from achieving our objective of a convergence of supply and demand."
He also noted that the energy ministers of Russia and Saudi Arabia are actively involved in the extension push by consulting with other countries, and he reiterated his happiness that Russian president Vladimir Putin has indicated his willingness to see cutbacks extend throughout 2018.
He also suggested that countries not currently involved in the cutbacks might participate in the extension, but declined to name them on the grounds that consultations are still in the early stages.
The push is fueled by the cartel's conviction that "a balanced oil market is now fully in sight," according to Barkindo, who drove home this point at the Oil & Money conference in London, and he added, "Stability is steadily returning and there is far more light at the end of the dark tunnel we have been traveling down for the past three years."
To support his claim, he pointed out that the inventory surplus in industrialized nations compared with the five-year average has fallen below 160 million barrels, less than half the level at the start of the year.
OPEC forecasts that stockpiles will return to the five-year average in the third quarter of next year.
However, oil prices fell more than 1 percent on Thursday on news of higher than expected product inventories in the U.S., which signaled slower demand for that country.
And given that on one hand Barkindo and fellow travelers gain media attention for their optimistic output while on the other unexpected fuel stock builds occur at the drop of a hat, it's unsurprising that analytical predictions of forthcoming crude prices would be wildly divergent.
For example, Jeremy Weir, chief executive officer of Trafigura, said at the Oil & Money conference that "Towards the back end of next year we're going to be well above $60" due to rising demand.
But Alex Beard, global head of oil at Glencore, hit the nail on the head by declaring, "You'll see oil at $100 again I'm sure, you'll see oil at $25 again - that's just the nature of the oil price."
Presumably one expert who isn't impressed by all the hoopla over OPEC coming closer to agreeing to a nine month cutback extension is Patrick Pouyanne, chairman and chief executive of Total: earlier this week he told media that at least a two year extension is necessary, on the grounds that "when you have three or four years of oversupply it takes time to rebalance the market."
