• 3 hours Norway Grants Record 75 New Offshore Exploration Leases
  • 7 hours China’s Growing Appetite For Renewables
  • 10 hours Chevron To Resume Drilling In Kurdistan
  • 13 hours India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 14 hours India’s Reliance Boosts Export Refinery Capacity By 30%
  • 16 hours Nigeria Among Worst Performers In Electricity Supply
  • 22 hours ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 1 day Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 1 day Saudis To Award Nuclear Power Contracts In December
  • 1 day Shell Approves Its First North Sea Oil Project In Six Years
  • 1 day China Unlikely To Maintain Record Oil Product Exports
  • 2 days Australia Solar Power Additions Hit Record In 2017
  • 2 days Morocco Prepares $4.6B Gas Project Tender
  • 2 days Iranian Oil Tanker Sinks After Second Explosion
  • 4 days Russia To Discuss Possible Exit From OPEC Deal
  • 4 days Iranian Oil Tanker Drifts Into Japanese Waters As Fires Rage On
  • 4 days Kenya Cuts Share Of Oil Revenues To Local Communities
  • 4 days IEA: $65-70 Oil Could Cause Surge In U.S. Shale Production
  • 5 days Russia’s Lukoil May Sell 20% In Oil Trader Litasco
  • 5 days Falling Chinese Oil Imports Weigh On Prices
  • 5 days Shell Considers Buying Dutch Green Energy Supplier
  • 5 days Wind And Solar Prices Continue To Fall
  • 5 days Residents Flee After Nigeria Gas Company Pipeline Explodes
  • 5 days Venezuela To Pre-Mine Petro For Release In 6-Weeks
  • 5 days Trump Says U.S. “Could Conceivably” Rejoin Paris Climate Accord
  • 6 days Saudis Shortlist New York, London, Hong Kong For Aramco IPO
  • 6 days Rigid EU Rules Makes ICE Move 245 Oil Futures Contracts To U.S.
  • 6 days Norway Reports Record Gas Sales To Europe In 2017
  • 6 days Trump’s Plan Makes 65 Billion BOE Available For Drilling
  • 6 days PetroChina’s Biggest Refinery Doubles Russian Pipeline Oil Intake
  • 6 days NYC Sues Five Oil Majors For Contributing To Climate Change
  • 6 days Saudi Aramco Looks To Secure $6B In Cheap Loans Before IPO
  • 7 days Shell Sells Stake In Iraqi Oil Field To Japan’s Itochu
  • 7 days Iranian Oil Tanker Explodes, Could Continue To Burn For A Month
  • 7 days Florida Gets An Oil Drilling Pass
  • 7 days Oil Prices Rise After API Reports Staggering Crude Oil Draw
  • 7 days Tesla Begins Mass Production Of Solar Shingles
  • 7 days EIA Boosts World Oil Demand Forecast For 2018 By 100,000 Bpd
  • 7 days Businessman Seeks Sale Of $5.2B Stake In Kazakhstan Oil Field
  • 7 days Exxon Accuses California Of Climate Change Hypocrisy
Alt Text

Norway Desperately Needs Large Oil Discoveries

Norway might sustain its current…

Alt Text

Oil Rally Falters As Traders Seize Profits

Oil prices withdrew on Friday…

Alt Text

The Most Feared Businessman In Russia

No politician or businessman is…

Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

More Info

Don’t Count On An OPEC Deal Extension

oil rig

A year ago this week, markets reeled from the surprise election of U.S. president Donald Trump, and eagerly awaited OPEC’s November meeting as the last hope for an oil price rally. This year, all eyes are on the Middle East, the Saudi political purge, and the heating-up of tensions between the kingdom and Iran. Meanwhile, OPEC once again prepares for its November 30 meeting in Vienna, where most expect it will announce another extension of its oil production cut agreement.

Bloomberg Gadfly’s Liam Denning’s recent account of the OPEC deal a year into the cuts suggests the current situation is similar to this time last year, with one notable exception. Last year, Denning says, investors and traders were highly skeptical of OPEC’s ability to really change prices by controlling production. Cheating was the leitmotif of this skepticism. This year, he notes, expectations are so bullish that net long bets on crude oil are now higher than they were right after the initial agreement was announced.

In the 12 months between November 2016 and November 2017, several things that used to be just suspicions or suggestions became evident: that OPEC is no longer the master of oil markets, capable of swinging prices higher or lower whenever it fancied; that U.S. shale is here to stay and grow; and that, were it not for demand growth and the latest developments in the Middle East, Brent would never have returned to $60 a barrel solely as a result of OPEC’s production cut efforts.

This conclusion may be painful for the cartel, but there’s plenty of evidence to support it. Despite the numerous ‘compliance is great’ remarks in recent months by senior OPEC officials, production is down, demand is up, nobody is cheating, and global inventories are falling; it took the Saudi purge in Riyadh and the threat of war for prices to really snap back. They are now at levels last seen two years ago. Related: Are Electric Cars As Clean As They Seem?

This price jump is now beginning to worry some analysts. It’s a simple truth that the higher the price of Brent, the more irresistible the temptation for OPEC members to cheat on their production quotas. What’s more, there’s a slim chance that the cartel will decide that the effect that tensions in the Middle East are having on oil prices will be sufficient to keep prices high without a deal extension. After all, the conflict between Saudi Arabia and Iran potentially threatens some 14 million bpd of crude, which is the combined production of the two archenemies. That’s 40 percent of OPEC’s total production.

Another possible outcome of November’s OPEC meeting is the delay of the decision that everyone seems to expect. Earlier this month, Russia’s Energy Minister Alexander Novak hinted that the decision may be announced later, depending on what the latest market data says about oil’s fundamentals. This delay would harm prices, but in light of the overwhelming optimism that an extension will eventually be approved, the effect is unlikely to be a lasting one.

Ultimately, an extension is the most likely outcome, as OPEC simply can’t afford to end the production cut agreement. But with rising regional tensions and the possibility of a major military escalation, nothing should be ruled out.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Johnny on November 13 2017 said:
    Disagree.OPEC reached a target.Inventories are draining.They are still controlling price and levels in tanks world wide.Demand will be higher as per future prospects.We are talking for one year about cheating....The key is what Saudis and Russians agreed during recently meeting.If they agreed 75$ price will be 75$.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News