OPEC members are happy with crude oil prices between US$60 and US$70 per barrel, Equatorial Guinea’s oil minister Gabriel Mbaga Obiang Lima told S&P Global Platts in an interview, contrary to earlier reports saying that the cartel’s leader, Saudi Arabia, alone needs oil quote a bit higher than that, at over US$80 per barrel if it is to avoid another budget deficit this year.
Obiang, however, also said OPEC will still try to convince its partners to extend the production cut deal closed last December until the end of the year, even though Brent crude is already trading above US$60 as is the OPEC basket of crudes. The Oman and Dubai benchmarks, however, are currently slightly below the US$60 threshold.
"$60-$70/b is the price that we all feel comfortable with," Obiang said. "It has been for almost a year like that ... that's really the right price for the producer and the consumer and we can all live with that."
The OPEC official went on to say that "What we all want is stability, we do not want volatility. We do all believe that it is important to extend the agreement to the end of the year to be able to monitor [the oil market]," he said. "We are definitely going to have an extension, we are working on that. Not having it would be a big surprise for everybody."
Regarding Russia’s apparent reluctance to join further cuts, including as expressed by President Putin who earlier this month said Russia is fine with cheaper oil, Equatorial Guinea’s oil minister said "You have to create drama ... but we all agree on the same thing."
More drama, however, was created by two Russian oil executives: the heads of Rosneft and Gazprom Neft, both of whom have called on the government to end the cuts as was originally planned, at the end of June, so they can start raising their production again. Rosneft’s Sechin even threatened that he would seek compensation from the Kremlin if it decided to join an extension.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- The Oil Price Risk Analysts Are Ignoring
- Declassified: The Sino-Russian Masterplan To End U.S. Dominance In Middle East
- Why The Oklahoma Shale Boom Isn’t Taking Off
Equatorial Guinea with an estimated production of 199,000 barrels a day is a very small player in OPEC and can’t and shouldn’t therefore speak on behalf of the organization.
OPEC+ will have to extend the production cuts to the end of the year and even consider making deeper cuts in the face of an escalating trade war between the US and China adversely impacting global oil demand and prices.
And while Russia could live with an oil price of $40 a barrel, President Putin is going to agree to an extension of the production cuts despite opposition from major Russian oil companies. In so doing, he will be specifically helping Saudi Arabia and consolidating Russia’s strategic relations with it and also extending his growing influence over the global oil market through his cooperation with OPEC.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London