Russia could pull out of the OPEC oil production cut deal before the end of 2018—or right after—as it has no obligation to stick with it, Iran’s Energy Minister, Bijan Zanganeh said. Russia “has no commitment to stay with it by the end of the year and OPEC may choose to alter the plan which I think would be unlikely," Zanganeh said.
So far Russia has kept its obligations under the deal, although Energy Minister Alexander Novak has mentioned that the deal may end sooner than December 2018 if the oil market rebalances. Russia aimed to cut 300,000 bpd from its record-high daily production rate for October 2016, which averaged 11.2 million bpd.
These comments, however, were made when there were indications the global oil supply overhang was shrinking and demand was growing. Now, production outside OPEC is growing as well, most notably, of course, in the United States. The Energy Information Administration reported yesterday that last week’s production hit 10.38 million bpd, up from 10.37 a week earlier.
In the latest edition of its Monthly Oil Market Report, OPEC said that non-cartel production would cover oil demand growth this year. Non-OPEC supply “is now expected to grow at a faster pace, leading also to an upward revision in y-o-y growth by 0.26 mb/d to average 1.66 mb/d, compared to the previous MOMR,” OPEC said, noting that the key growth drivers will be the U.S., Canada, Brazil, and the UK.
But it’s not just production that OPEC and Russia have a problem with. Exports from the United States are also growing—eating into OPEC’s market share in Asia—a key market. No wonder talk about an earlier end to the deal has begun again.
Then there is the internal disagreement on prices within the cartel, which once again has Saudi Arabia pitted against Iran. This time, however, the spat is over determining what the best price level is for the commodity. The split, apparently, stems from Saudi Arabia’s insistence that crude oil should be kept closer to US$70 a barrel—a level Brent touched briefly early this year—and Iran’s equal insistence that US$60 is a better place for oil to trade at.
By Irina Slav for Oilprice.com
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