© EPA/LISI NIESNER
VIENNA, may 25. /TASS/. The next meeting of OPEC and independent countries involved in the transaction to reduce oil production, ended without surprises. The Alliance extended the current agreement on terms approved in late 2016 to April 2018. However, the Ministers conceded that this fall may have to tighten measures to stabilize the market.
Two meetings in one day, in the end adopted what was said since the beginning of may, when the Russian Minister of energy Alexander Novak and his counterpart from Saudi Arabia, Khaled al-Faleh made a joint statement in Beijing. Then they announced that they will recommend to prolong the existing agreement for another nine months while keeping the current quotas for each of the participants .
Will continue: what will the arrangement on decrease in volumes of oil production
However, the journalists present at the meeting in Vienna, according to tradition, a few days before her and was waiting for the Ministers in hotels in the city, waiting for intrigue. Whether it will maintain its benefits Iran, Nigeria and Libya? I agree to limit production until next spring Kazakhstan, which is planned this year to increase production? Join the deal, Turkmenistan and Egypt?
But an unexpected news came from the Russian Ministry of energy. Speaking to the media after the meeting of the monitoring Committee of 24 may, he said that the draft agreement envisages the possibility of extending the deal for another three months after March 2018. However, in the final decision, this option was not included.
In the end, special conditions are kept and Libya, Nigeria and Iran, which can still increase production. “These countries already faced a lot of challenges, OPEC and other countries are in their situation” – said the Saudi Minister.
Supported the transaction on the same terms and energy Minister of Kazakhstan Kanat Bozumbayev, who in conversation with journalists has not excluded “discussion of quota”.
Egypt and Turkmenistan did not participate in the negotiations, as previously hoped OPEC Secretary General Mohammed Barkindo. However, at the final press conference, the Saudi Minister expressed hope that in the future these countries will join the agreement. His colleague, the Minister of petroleum of Ecuador, Carlos Perez added optimism, saying that “some new members” can join the Alliance this fall, at the regular meeting on November 30. At the same time the Ministers will consider the question of the extension of the transaction beyond March 2018.
The Minister of energy of Azerbaijan Natig Aliyev noted that “may require more drastic measures” in a more serious production cuts. Everything will depend on the stock situation, he added.
The price will stand
Despite the positive outcome of the meeting, oil prices continued their decline today. The cost of the futures on Brent crude oil with delivery in July 2017 fell by 3.2% to $52,26 per barrel, WTI – by 3.5%, to $from 49.55 per barrel.
However, respondents TASS analysts forecast growth of prices as the expectations from the meeting have already been priced in.
In the short term prices are also unlikely to grow, experts believe. “Most likely, the solution will support prices in the range of fluctuations where they are now. In order to raise the price to the upper ranges, it would be necessary to take more drastic reductions and quota increases,” – said the analyst of “Finam” Alexey Kalachev.
Analyst of Sberbank CIB Valery Nesterov noted that some rise in oil prices is still possible in the short term. “Our expectations that the average annual price of oil will be $55-56 per barrel by the end of the year could rise above $58, become more confident after the extension of the agreement. The result of the extension of the transaction would be to reduce the volatility of oil prices, its stabilization at a higher level,” – said the expert.
Nesterov sure if the agreement was not extended, the price of oil could fall below $50, to $45 per barrel. According to him, Russia may lose about 10 million tonnes in 2017 due to the expiration of this agreement. “Without the agreement of the production in Russia would be at 560 million tons, with a corresponding increase in exports. In the same position Saudi Arabia and other countries. For the budget (extension of agreement – approx. edited by TASS) will have a positive effect through the price increase, and this will reduce the negative effect from the reduction of production volumes”, – said Nesterov.
However, the exporting countries involved in the agreement are satisfied with the current situation of prices, said the Ecuadorian Minister. According to him, the price of oil in the range of $55-60 per barrel suits everyone.
With an eye on US
When deciding on the further restriction of output, participants did not forget about those producers who are increasing production in parallel, taking advantage of the favorable pricing environment. “Yes, we were discussing shale production in the United States. This is a factor that we cannot influence. Of course, we discussed”, – said the oil Minister of Ecuador, Perez.
The Secretary General of OPEC Barkindo assured reporters that OPEC will maintain a constructive dialogue with shale producers from the US, which began in March on the oil and gas conference CERAWeek. Then Barkindo said that OPEC has established a dialogue with the producers of shale oil in the USA and he had a meeting with the heads of twenty of them.
Factor other manufacturers are important for the balancing market which, as hope of OPEC will recover in early 2018. “There are other options as already hackneyed growing shale production in the United States, as well as the growth of oil production in Brazil, Canada and Norway,” says the analyst of “Finam”. However, Kalachev doubt that the market will recover to the indicated time.
Agrees with him Director of the Energy center business school SKOLKOVO Tatiana Mitrova, according to which nine months may not be enough to restore market. “The past months have shown that the overhang of stocks and the current bid is too high, and the growth of demand remained insufficient to absorb this excess. Even nine months may not be sufficient for rebalancing the market,” she explains.
Analyst Raiffeisenbank Andrey Polischuk considers that the balance of supply and demand can only come in the first half of 2018, as the current reduction of oil production by OPEC is not as strongly influenced the proposal. “Probably the same situation will be during the second agreement, so I would say that the balance is possible in the first half of 2018 due to the increase in demand”, – said the analyst.
“There is a certain confidence that the market stabiliziruemost, surplus oil will be gradually reduced and a balance can be achieved by the end of 2017. Another thing is that today’s agreement does not solve long-term problems of pricing, they are just postponed for almost a year – at the end of the agreement all the same problems will remain,” says the analyst of Sberbank CIB’s Nesterov.
He believes that the overproduction of oil in the market may persist until the 2020-ies, in view of the agreement on production cuts may be forced to extend until the end of 2018, to prevent a price collapse.