25-05-2017

Russia pushes for 9-month extension of OPEC/non-OPEC cuts, but other options in play

oil

Despite leading efforts to extend the OPEC/non-OPEC oil output deal by nine months, Russian energy minister Alexander Novak said Wednesday “several options” were still being considered by the producer coalition.

“The base proposal is [an] extension for 9 months,” Novak told reporters as he arrived in Vienna for talks with OPEC.

He declined to comment further when asked if other countries beyond the 11 non-OPEC producers that had signed onto the deal would join.

Russia itself is now slightly overcomplying with its commitment to cut 300,000 b/d of oil production from October levels, having achieved a 310,000 b/d cut since the beginning of the month, he said.

The country had been slow to comply with its agreed cut, having only reached its 300,000 b/d commitment last month.

Several deal participants have also said they back a nine-month extension, which Novak and Saudi counterpart Khalid al-Falih last week said they would be advocating for, but OPEC sources have told S&P Global Platts that the deal is not yet nailed down.

A five-country monitoring committee that includes Kuwait, Venezuela, Algeria, Russia and Oman is set to formally recommend the nine-month extension at a meeting today.

“We are going to discuss mostly the reason why it should be nine months instead of six,” Venezuelan oil minister Nelson Martinez told reporters. “We want to avoid the impact of the turnarounds that normally take place in the first quarter.”

Kuwaiti oil minister Essam al-Marzouq told reporters that “all options are open,” while UAE energy minister Suhail al-Mazrouei said: “OPEC is based on consensus so we need to hear all of the options and make the right choice.”

Earlier Wednesday, Iranian oil minister Bijan Zanganeh said OPEC was to debate a three-, six- or nine-month extension but would not consider deeper cuts.

“All agree…to maintain OPEC’s production ceiling, [but] the term is not clear,” Zanganeh said on the sidelines of an Iranian cabinet meeting in Tehran, according to the country’s ISNA news agency. “Maybe three months, six or nine months.”

Zanganeh is due to arrive in Vienna later Wednesday.

Ecuadorian oil minister Carlos Perez said Tuesday that two proposals are on the table — a six-month extension and a nine-month one, both at current quotas.

Under the current deal, OPEC committed to a 1.2 million b/d cut, while the 11 non-OPEC countries agreed to cut 558,000 b/d, from January through June.

Falih, who arrived Tuesday in Vienna but declined to comment to reporters, has said multiple times in the last week that the producer group was prepared to do “whatever it takes” to draw down inventories to the five-year average, as OPEC has said is the goal.

Source: Platts 

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