OPEC’s High-Level Technical Committee, which is meeting in Vienna to discuss the implementation of the proposed group-wide production cap, could be done by the end of the day today, a Nigerian delegate told media.
The committee is a body selected by member states, comprised of OPEC governors and oil ministry officials, and tasked with clarifying the manner in which the production cut will be implemented. However, as Reuters points out, the committee cannot decide on policy; it can only recommend a course of action that will be approved or discarded by the minister of OPEC members, who are meeting next Wednesday in Vienna.
According to the Nigerian delegate cited by Reuters, Ibrahim Waya, “The likelihood is that everybody will be on board by the end of today,” including Iran and Iraq.
His optimism, however, may be a bit much in light of the latest quote from an Iraqi official: Foreign Minister Ibrahim al-jafari told media in Budapest earlier today that, “It would not be fair for us to cut oil output,” once again restating their desire to be exempt from any cutting, despite the Saudi insistence that they will not carry the weight of the cuts alone, and that everyone needs to be on board.
The Iraqi comments come just one day after Oil Minister Jabbar al-Luaibi said that Iraq will be putting up three new proposals for discussion at the cartel’s technical committee meeting, aiming to “make it easier for OPEC members to make a decision.” And while it is still unclear what those three new proposals are, judging by today’s comments, those three new proposals don’t include oil production cuts for Iraq.
Quotes like these—which some interpret as contrarian, some purposefully ambiguous, and others overly cautious—have been shaking international oil markets for almost two months now, keeping benchmark prices on a perpetual see-saw as analysts endeavor to read between the lines and reflect the latest mood swing of the market in their forecasts.
Goldman Sachs yesterday said, for instance, that it was “tactically bullish” on oil, thanks to the signals coming from the Technical Committee that it will reach some kind of agreement by the end of its two-day meeting. The feeling of optimism spread, pushing up oil prices, with Brent at US$49.11 at 7:35 AM EST, and WTI at US$48.32 before falling a bit lower later in the morning.
But skepticism remains in the absence of clear and unequivocal support for the plan—whatever that plan actually is—between major OPEC producers such as Saudi Arabia, Iraq, and Iran, not to mention Russia, which although not an OPEC member, would be crucial for any meaningful reduction in supply.
Despite all the public comments designed to prop up a struggling market, OPEC members and Russia have increased crude oil production since the talks began in September.
According to secondary sources provided by OPEC, OPEC members combined have produced 33.64 million bpd of crude oil in October, up from 33.40 million bpd in September, and 33.23 million bpd in August. Russia—the world’s top producer of crude oil—produced 11.21 million bpd of crude in October, up from 11.20 million bpd in September and 10.71 million bpd in August. All signs are that neither entity is slowing—in fact, the figures suggest quite the opposite—with Goldman Sachs upping its expected total average production for Russia in 2017 to 11.7 million bpd from its previous 11.4 million bpd.
With the total world oil demand estimated to be 97.08 million bpd, that means OPEC’s and Russia’s combined production of 44.85 million bpd account for 46 percent of the total supply in the world.
So regardless of the outcome of the meeting, which is still very much in question, OPEC, left on its own to cut a mere million barrels per day, cannot realistically and fundamentally rebalance the heavy overhand with demand in the six months that they are suggesting.
By Irina Slav for Oilprice.com
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