November 28, 2016

Oil Production cut deals look unlikely

OPEC officials failed on Monday to bridge their differences on an agreement to cut production and revive oil prices, following comments from Saudi Arabia that output curbs aren’t essential.

With just two days left before ministers from the Organization of Petroleum Exporting Countries meet to finalize the first decline in production in eight years, the foundations for a deal are looking increasingly shaky.

A proposed deal would trim production by 1.2 million barrels a day from October levels, though it remains unclear whether the idea has the support needed for approval

On Sunday, Khalid Al-Falih, the Saudi oil minister, for the first time floated the possibility of leaving Vienna without an agreement.

"Saudi Arabia and Iran are all playing very strong negotiation tactics," said Abhishek Deshpande, chief energy analyst at Natixis SA in London. "The problem for Saudi Arabia is that this isn’t the 1980s and 1990s, when it could use its clout and expect others to follow. Today members like Iran and Iraq are equally strong and their agenda is to ensure they get a large market share.”

Without an OPEC cut, the International Energy Agency predicts that the oil market will remain in surplus for a fourth year in 2017, which could cause prices to fall. Brent crude rose 2.1 percent to $48.24 a barrel Monday in London.

As OPEC tries to resolve its own differences, the group is also asking other big producers including Russia to reduce output by as much as 600,000 barrels a day. The Kremlin so far has resisted OPEC’s request that it joins the cut, offering instead to freeze production at its current level.






SOURCES- Bloomberg

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