Opec sent its strongest signal yet for an extension of production cuts until the end of 2018, saying preparations for the next meeting are taking their lead from Russian President Vladimir Putin’s tentative backing for a further nine months of curbs.
If the Organisation of Petroleum Exporting Countries and allies including Russia decide they need to extend their supply deal, it should be done at least until the end of next year, Putin said in Moscow on October 4. That statement is the basis for talks, led by Russian Energy Minister Alexander Novak and his Saudi counterpart Khalid Al Falih, aimed at creating a consensus for the November 30 meeting, said Opec Secretary-General Mohammad Barkindo.
Putin “gave a very pointed answer, which we are taking very seriously — this was the president talking,” Barkindo told reporters at the Oil & Money conference in London. “Khalid Al Falih is on tour of some of our member countries to build consensus. Novak is also in extensive consultations with non-Opec.”
The 24 oil-producing nations that agreed to cut production last year have already extended their deal once — by nine months until the end of March 2018. A balanced market is now “in sight,” Barkindo said, but with Opec’s own internal forecasts indicating surplus inventories won’t be fully eliminated until the third quarter of next year, speculation has increased that the group would prolong its curbs further.
Since Putin’s intervention, representatives of Iran, Angola and Algeria have indicated their willingness to extend. If oil producers want to rebalance the market, they should continue their cuts, Fatih Birol, executive director of the International Energy Agency, said in an interview last week.
While Barkindo said it was premature to talk about what consensus might emerge from the preparations for November 30, he gave an upbeat assessment of the group’s production cuts. The oil inventory surplus in industrialised nations compared with the five-year average has fallen below 160 million barrels, less than half the level at the start of the year. The sceptics who said the deal wouldn’t work have been proved wrong, he said.
“We are satisfied that the mechanism and the strategy are all working,” Barkindo said in an interview with Bloomberg Television. “We are satisfied that the way forward is to sustain what is working.”