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The outlook for "output restraint agreements" among major oil producers is uncertain

Classification:
Company news
2016/09/27 08:46
[Abstract]:
Members of the organization of the petroleum exporting countries (Opec) and other major oil producers will discuss curbing production to boost international oil prices during the 15th international energy BBS, which starts on September 26 and ends on September 28. But the recent major oil producers repeated words, significant differences, the production limit agreement is still difficult to determine.

Members of the organization of the petroleum exporting countries (Opec) and other major oil producers will discuss curbing production to boost international oil prices during the 15th international energy BBS, which starts on September 26 and ends on September 28. But the recent major oil producers repeated words, significant differences, the production limit agreement is still difficult to determine.

Saudi Arabia, the world's largest crude exporter, is not expected to make any decision on production curbs at the BBS meeting in Algiers, foreign media reported. Opec will also hold an informal meeting to discuss production curbs.

"The Algiers meeting is not a meeting where decisions on production are made, [its purpose] is to hold consultations." A source familiar with the thinking of Saudi oil officials said. Saudi Arabia is willing to cut its own oil production if Iran agrees to a cap on its output this year, Reuters said, citing people familiar with the matter.

However, Iranian officials said Tuesday that Iran could not agree to a "production restriction", which would force the country to limit its output to 3.6 million barrels per day (BPD), down from 4 million BPD before it came under international sanctions.

With Opec deeply divided, the bloomberg article was also less optimistic about the prospects for a deal, reporting that representatives of Russia, another big producer, would only join the discussion after building consensus on crude supplies within Opec, and that Russian representatives could leave before the group's informal meeting on Sept. 28.

"We believe that if the result of the Algiers meeting is' no deal ', it shows that Opec has not only failed to reach an explicit agreement to limit production at the meeting, but also failed to develop a forward-looking plan." Macquarie capital group said in the report.

While the kingdom's attitude toward the September meeting is purely 'consultative,' it will continue to discuss ways to stabilize oil markets with other producers ahead of Opec's formal meeting in November, according to people familiar with the matter. Saudi Arabia, the world's largest oil producer, wants to see higher oil prices to encourage investment in the energy sector. The international energy agency warned this month that the sector could see spending cuts for a third year in a row next year.

Saudi Arabia and Russia agreed at the g20 summit in hangzhou, China, to strengthen cooperation to stabilize oil markets, but did not agree on immediate action measures such as limiting production. The joint voice of the world's two major oil producers to "rescue the market" is conducive to boosting market confidence. But for now, Russia and Saudi Arabia are producing record amounts of oil and are willing to freeze production, while it remains to be seen whether other countries will cooperate.

This year is not the first time that Russia and Saudi Arabia have joined forces to prop up the market. On February 16th Russia, Saudi Arabia, venezuela and Qatar agreed to freeze oil production at January levels. But in fact, the first half of the freeze production action is just talk on paper. Other producers, such as Iran, are reluctant to cooperate with the freeze because output has not yet recovered. Meanwhile, far from freezing production, Russia and Saudi Arabia are setting new records.

In the past, Opec has positioned itself as an oil price setter with the ability to sway the market and match international demand by controlling the output of its members. But U.S. oil production is booming, Opec output is having less of an impact on prices than it once did, and Opec members like Saudi Arabia are now even pumping at full capacity in an effort to defend market share against competition.

North America's shale oil "meddled" in international oil prices and curbed production, which has recovered for two straight months and is expected to return to growth in the third quarter. Industry insiders say shale oil is unlikely to cooperate with production curbs, and if other countries do, the recovery will be even faster once prices recover.

Without the ability to affect the actual supply side of the oil market, Opec has few tools to boost prices, the Wall Street journal said. Oil prices are well below the $100 a barrel that member states such as venezuela need to balance their domestic budgets. The rebound in oil prices has provided a short-term cash boost for Opec members, whose announcements of cooperation on oil production show their domestic populations that they are trying to do something more politically about oil prices.