Sunday, 13 June, 2021

OPEC tries to rally other oil producers to its cause

The organization, meeting in Vienna, seeks to consolidate the rise in oil prices.

Oil prices for Brent ended Friday at $ 54.16 in London

The oil-producing countries were counting on reaching a new production reduction agreement in Vienna on Saturday, associating with the limitation pact recently concluded between OPEC members from countries outside the organization to consolidate the rise in prices. The meeting began in the middle of the morning at the OPEC headquarters in Vienna, in an atmosphere of optimism maintained by the statements of the participants, that is to say thirteen members of the cartel to which joined a dozen of outside participants, including Russia, first producer outside Opep.

After flooding the black gold market and causing a dramatic drop in prices since 2014, the members of the Organization of the Petroleum Exporting Countries (OPEC) managed on November 30 to agree on a decrease in their production of 1 , 2 million barrels per day. The cartel is asking producers who are not members of the organization to also limit their production to 600,000 barrels per day in total, an effort to which Russia has already agreed to the tune of 300,000 barrels.

The general secretary of OPEC, Mohammed Barkindo, was very positive before the meeting, estimating that an agreement with the non-OPEC producers carrying a reduction of 600,000 barrels, “and even more”, would be reached. He described Saturday’s meeting, between cartel members and non-members, “historic”, considering that the “political climate had changed”.

The pending market

The Russian Alexander Novak, opening this meeting which he co-chairs, said he was “certain that today (the participants, editor’s note) would overcome the difficulties” with a view to an agreement, describing the meeting “d ‘unique opportunity’.

Qatari Energy Minister Mohamed Saleh Al-Sada, whose country holds the rotating OPEC presidency, spoke of a “vital meeting for all producing countries, industry and the global economy”

Enthusiastic at first, the markets are awaiting new signals from producers giving credibility to their commitment and detailing the implementation of this drop in supply. After fluctuating over the week, prices ended Friday at $ 54.16 in London, slightly down from last Friday’s close.

Natural or voluntary decline?

Kazakhstan, Azerbaijan, Oman and Mexico City are among the non-OPEC oil producers present in Vienna on Saturday. Among the guests were again Bolivia, Brunei, Colombia, Congo, Egypt, Trinidad and Tobago, Turkmenistan and Uzbekistan. “The optimism that surrounded the announcement of the agreement (of November 30, editor’s note) has slightly eroded, because OPEC told the press that countries which are not members of the cartel (…) could use the natural drop in their extractions to achieve this goal, ”said Bjarne Schieldrop, analyst at SEB on Friday.

As these natural reductions in extractions, linked to the depletion of resources, are already incorporated into forecasting models, “we do not expect this meeting to play a significant role in rebalancing the market,” the analysts observed. by DNB Markets. The Vienna talks are also an opportunity for Russia to reassure skeptics about its commitment to implement the agreement.

Budget margins for Putin

The Russian authorities said Wednesday they had the “support” of private oil companies to lower production in concert with OPEC, but without providing any details on the practical modalities of such a measure. Moscow, whose finances have been weighed down by the fall in prices, a priori has every interest in a lasting rebound in prices, which would give Vladimir Putin significant budgetary leeway just over a year before the presidential election.

The large producers of OPEC, Saudi Arabia in the lead, whom the fall in prices had ended up financially, had for their part resolved to change their strategy after having long supported this policy of low prices in the hope oust their competitors, especially US shale oil producers

(With AFP)

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