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Oil Up On OPEC Optimism

While broader financial markets struggle…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Kuwaiti Oil Minister: OPEC Cuts May End Earlier Than Planned

To keep the air of mystery, or whatever remains of it after the November 30 Vienna Club meeting, Kuwait’s Oil Minister Issam al Marzouq yesterday said the cuts may end before the end of 2018.

“We still have a full year left in the agreement, but there is a possibility that we exit the cuts agreement before 2019 if the market is re-balanced by June,” Al Marzouq said, adding that Russia was pressuring its partners in the agreement to end it as soon as it is possible. The minister was speaking to Bloomberg on the sidelines of an event of the Organization of Arab Petroleum Exporting Countries.

Separately, at the same event, Al Marzouq said he expected the market to rebalance no sooner than the last quarter of 2018, in keeping with the extension that OPEC and its partners agreed to in Vienna last month. He added that prices should remain at current levels, which seem to be just high enough to stimulate increased drilling in the United States: the first Baker Hughes rig count report for December revealed an addition of two rigs, to a total 751, pressuring international oil prices immediately, albeit moderately.

Related: Why Isn't Wall St. Backing The Next Shale Boom?

WTI continues to trade above US$57 a barrel and Brent is still above US$63, but as one analyst told Reuters, if U.S. production continues to increase, it would undermine the cuts that OPEC, Russia, and ten other producers agreed to. In other words, they might decide to drop the whole thing before December 2017 if it fails to restrain U.S. production.

However, optimism seems to be prevailing at the moment, and as Russia’s Alexander Novak told the media in Vienna, OPEC and its partners had factored in an increase in U.S. shale production—the spearhead of growing overall production in the world’s largest oil consumer. How much of an increased they factored in remains unclear.

By Irina Slav for Oilprice.com

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  • Jayant on December 11 2017 said:
    Artificial barriers on supply cannot sustain when many oil producing countries are striving for reconstruction of war damaged infra and re-settlement and American oil companies are out for killing. Demand too is expected to be weak as normal winter increase in demand is missing as power took over oil. Demand reduction due to electric cars is going to a big blow starting from 2020. It will force many a oil producing companies to throw away OPEC today itself and reap as much as possible till then. Immediate effect - excess supply crashing the rates. Unavoidable. But better than then selling at $30 by the end of 2025. No point in letting oil then forever remaining underground! No big brains needed to see this. March 2018 is max limit for the crash. Have the figures but no point in lengthening this comment.
  • Dinis on December 14 2017 said:
    Of course, Russia exerts pressure. After all, it was surrounded on all sides. The US imposes its own policy and tries to get everywhere. It is necessary not to pay attention to these failures and to be engaged in one's own business, and also to establish cooperation with Russia, despite the sanctions.

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