OPEC and allies prepare to deepen oil output cuts

Saudi Arabia's Minister of Energy Prince Abdul Aziz bin Salman arrives at the OPEC headquarters in Vienna, Austria December 5, 2019. (Reuters)
Updated 05 December 2019

OPEC and allies prepare to deepen oil output cuts

  • Saudi Energy Minister Prince Abdul Aziz bin Salman said he “feels good” about this week’s meetings
  • Russian Energy Minister Alexander Novak told Prince Abdulaziz on Thursday that Russia-Saudi energy cooperation should continue

VIENNA: OPEC and its allies led by Russia on Thursday were moving closer to agreeing one of the deepest output cuts this decade to support crude prices and prevent a glut, sources from OPEC and its allied producers said.
The Organization of the Petroleum Exporting Countries (OPEC) meets on Thursday in Vienna and with Russia and others, a grouping known as OPEC+, on Friday.
Three OPEC+ sources told Reuters on Thursday the group would discuss increasing current cuts of 1.2 million barrels per day by more than 400,000 bpd.
The current cuts expire in March and OPEC+ sources and delegates have said the new deal could be extended either to June or until the end of 2020.
Some sources and OPEC watchers have suggested the overall cut could be closer to 1.8-2.0 million bpd with new cuts and a push for better compliance with targets.
OPEC+ has curbed supply since 2017 to counter booming output from the United States, which has become the world’s biggest producer while also imposing sanctions on Iran and Venezuela to curb their oil exports.
Next year, rising production in the United States and other non-OPEC countries such as Brazil and Norway threaten to add to the glut.
In the past few months Trump has said little about OPEC but that might change later in 2020 if oil and gasoline prices rise — a politically sensitive issue as he seeks re-election in November.
Washington’s ongoing trade dispute with China has also clouded the economic and therefore oil demand outlook for 2020.
Saudi Energy Minister Prince Abdul Aziz bin Salman said he “feels good” about this week’s meetings but declined to comment on policy matters in Vienna.
Russian Energy Minister Alexander Novak told Prince Abdulaziz on Thursday that Russia-Saudi energy cooperation should continue, his ministry reported.
Oil minister Bijan Zangeneh of Iran, which is exempt from the cuts, said he would support a deeper cut if that was agreed by other producers.
Ministers from Saudi Arabia, Russia, Kuwait, the UAE, Algeria, Oman and Algeria began their pre-OPEC meeting at 11 GMT with the OPEC meeting not expected to start before 1400 GMT.
Saudi Arabia needs higher oil prices to support its budget revenue and the pending initial public offering (IPO) of state-owned oil giant Saudi Aramco with pricing of the IPO expected on Thursday.
OPEC’s actions have supported oil prices at around $50-$75 per barrel over the past year. Brent crude futures on Thursday extended this week’s gains to trade above $63 per barrel.
OPEC sources have also said Riyadh was pressing fellow members Iraq and Nigeria to improve their compliance with quotas, which could provide an additional reduction of up to 400,000 bpd.
Non-OPEC Russia has yet to agree to extend or deepen cuts from its current pledge of 228,000 bpd as its companies are arguing they are finding it tough to reduce output during winter months due to very low temperatures.
A source familiar with the Russian thinking told Reuters that Moscow would likely reach a deal with OPEC this week and just needed to iron out a few outstanding issues.
One sticking point for Russia is how its output is measured. Russia includes gas condensate in production figures, while other producers do not. Zangeneh said on Thursday that Russia’s stance on the matter was logical.


Big oil feels the heat on climate as industry leader promises: ‘We will be different’

Updated 22 January 2020

Big oil feels the heat on climate as industry leader promises: ‘We will be different’

  • Trump singles out ‘prophets of doom’ for attack
  • Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal

LONDON: Teenage environmental activist Greta Thunberg slammed inaction over climate change as the global oil industry found itself under intense scrutiny on the opening day of the World Economic Forum in Davos.

The teenage campaigner went head to head with US President Donald Trump, who dismissed climate “prophets of doom” in his speech.
She in turn shrugged off the US president’s pledge to join the economic forum’s initiative to plant 1 trillion trees to help capture carbon dioxide.
“Planting trees is good, of course, but it’s nowhere near enough,” Thunberg said. “It cannot replace mitigation. We need to start listening to the science and treat this crisis with the importance it deserves,” the 17-year-old said.
The 50th meeting of the World Economic Forum was dominated by the global threat posed by climate change and the carbon economy.
The environmental focus of Davos 2020 caps a year when carbon emissions from fossil fuels hit a record high, and the devastating effects of bushfires in Australia and other climate disasters dominated the news.
Oil company executives from the Gulf and elsewhere are in the spotlight at this year’s Davos meeting as they come under increased pressure to demonstrate how they are reducing their carbon footprint.
“We are not only fighting for our industry’s life but fighting for people to understand the things that we are doing,” said Vicki Hollub, CEO of Occidental, the US-based oil giant with extensive oil operations in the Gulf. “As an industry when we could be different — we will be different.”

‘Planting trees is good, but nowhere near enough,’ activist Greta Thunberg told Davos. (Shutterstock)

She said the company was getting close to being able to sequester significant volumes of CO2 in the US Permian Basin, the heartland of the American shale oil industry which is increasingly in competition with the conventional oil producers of the Arabian Gulf.
“The Permian Basin has the capacity to store 150 gigatons of CO2. That would be 28 years of emissions in the US. That’s the prize for us and that’s the opportunity. People say if you’re sequestering in an oil reservoir then you are producing more oil, but the reality is that it takes more CO2 to inject into a reservoir than the barrel of oil that it makes come out,” Hollub said.
The challenge Occidental and other oil companies face is to make investors understand what is happening in this area of carbon sequesteration, she added.
The investment community at Davos is also looking hard at the oil industry in the face of mounting investor concerns.
Greenpeace told the Davos gathering that the world’s largest banks, funds and insurance companies had invested $1.4 trillion in fossil fuel companies since the Paris climate deal. It accused some of these groups of failing to live up to the World Economic Forum goal of “improving the state of the world.”