OPEC and Russia agree extension to oil output cuts

OPEC Conference President and Saudi Arabia’s Energy Minister Khaled Al-Falih (L) and OPEC Secretary General Mohammed Barkindo at the start of the 173rd meeting of OPEC ministers in Vienna yesterday. (AFP)
Updated 01 December 2017
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OPEC and Russia agree extension to oil output cuts

LONDON: OPEC and non-OPEC countries, including Russia, patched up their differences yesterday and agreed to a nine month extension to oil output cuts first agreed in December 2016 after the price fell as low as $30 per barrel.
The current deal, under which producers agreed to cut supply by about 1.8 million barrels per day, was due to expire in March 2018, but will now be extended till the end of next year following a meeting in Vienna.
Markets breathed a sigh of relief as the current tariff of about $62 per barrel was viewed as factoring in an extension of production curbs that have helped the price recover by around 38 percent since last December’s $45 per barrel.
Robust global economic growth has also been a major factor, and there has been a significant reduction in global inventories as producer countries combined forces in a bid to bring supply and demand back into balance.
There will be wriggle room for the agreed cuts to lapse in the event of the market overheating. Additionally, there remains uncertainty as to the “trigger” price that could see US shale operators suddenly ramp up supply, raising the spectre of another glut.
The new agreement seeks to involve Opec members Nigeria and Libya, which were not signatories to the earlier accords.
The Vienna accord is a geopolitical and diplomatic win for Saudi Arabia, by far Opec’s largest supplier, as its leaders would appear to have persuaded Russia to go along with an extension even though some Russian suppliers have lobbied for the agreement to be scrapped as Russia needs lower oil prices to balance its budget than KSA.
But last month’s visit to Moscow by King Salman who met Vladimir Putin underlined the development of a more positive relationship between the two countries. Both have an interest in maintaining a balanced oil market.
The state visit was the first by a reigning Saudi monarch and came despite Russian support for Iranian-backed forces in Syria.
In Austria yesterday, Saudi Energy Minister Khalid Al-Falih told the gathering that in May the OECD stock overhang was 280 million barrels above the moving five-year average, but it had since fallen by almost half to 140 million barrels for the month of October.
He said: “All in all, market stability has improved and sentiment is generally upbeat. The rebalancing trend (towards the five year average) has accelerated and inventories are on a generally declining trend.”
Compliance with the production targets by the combined OPEC 12 was around 100 percent and OPEC’s credibility had been enhanced, although a couple of members had “lagged” behind, he said.
He added: “To succeed going forward, it is essential that we continue to maintain unity within OPEC. But let me hasten to add that without the support of our non-OPEC partners, the encouraging situation we see today would not have been achieved. So, we should seek to institutionalize the OPEC and non-OPEC cooperation framework, and further build on the healthy foundation we have laid.”
 


Saudi Aramco concerned over Gulf attacks, has capacity to meet demand: CEO

Updated 25 June 2019
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Saudi Aramco concerned over Gulf attacks, has capacity to meet demand: CEO

  • ‘What’s happening in the Gulf is definitely a concern’
  • Aramco has no plan to increase its current maximum output capacity of 12 million barrels per day, given sizeable spare capacity

Saudi Aramco concerned over Gulf attacks, has capacity to meet demand: CEO
SEOUL: Saudi Aramco is concerned at recent actions in the Gulf but can meet its customers’ needs thanks to its experience and the availability of additional spare capacity, its chief executive said on Tuesday.
“What’s happening in the Gulf is definitely a concern,” Amin Nasser, president and chief executive of Saudi Arabia’s state oil giant, told Reuters in an interview.
“At the same time, we went through a number of crises in the past ... we’ve always met our customer commitments and we do have flexibility and the system availability in terms of available additional spare capacity.”
Recent tanker attacks in the Gulf have raised fears about safety of one of the world’s key shipping routes and pushed up oil prices.
Nasser, who is in Seoul ahead of a visit by Saudi Crown Prince Mohammed bin Salman, said Aramco has no plan to increase its current maximum output capacity of 12 million barrels per day (bpd), given sizeable spare capacity.
“If you look at our production, it is hovering around 10 million barrels per day so we do have additional spare capacity,” he said.
The oil giant is aiming to become a major global gas player, and has been developing its own gas resources as well as eyeing gas assets in the United States, Russia, Australia and Africa.
Nasser said Aramco is in talks to buy a stake in Russian gas company Novatek’s Arctic LNG-2 project, while exploring other investment opportunities in gas.
He confirmed the company is also in discussions about buying a stake in India’s Reliance Industries and in talks with other Asian companies about investments.
“We will continue to explore opportunities in different markets and different companies, and these things take time,” he said.
Nasser said the company, South Korea’s top oil supplier, was looking to increase its crude oil supplies to the country where it has partnerships and investments with South Korean refiners.
Saudi Aramco supplies between 800,000 barrels per day (bpd) and 900,000 bpd to South Korea, the world’s fifth-largest crude importer.