OPEC aims to discuss making permanent its coalition with 10 and possibly more non-OPEC producers to manage oil market balances at its November 30 meeting, the organization’s secretary general, Mohammed Barkindo, said Thursday. “This platform of 24 countries, now hopefully growing, should be institutionalized,” Barkindo told reporters at the Oil and Money conference in London.
OPEC aims to discuss making permanent its coalition with 10 and possibly more non-OPEC producers to manage oil market balances at its November 30 meeting, the organization’s secretary general, Mohammed Barkindo, said Thursday.
“This platform of 24 countries, now hopefully growing, should be institutionalized,” Barkindo told reporters at the Oil and Money conference in London.
“We should have a permanent framework to sustain this platform.”
Barkindo said the proposal to formalize cooperation with non-OPEC countries should “give comfort” to some currently non-participating countries, an apparent reference to efforts to get more countries to join the cuts.
OPEC late last year agreed with 10 non-OPEC countries, led by Russia, to cut a combined 1.8 million b/d in supplies to support the market’s rebalancing.
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Asked about projections by the IEA of oversupply in the first quarter of 2018 and how that would play into discussions about renewing supply cuts which expire at the end of March, Barkindo cast doubt on the projections.
“For us the projections for 2018 remain robust. We are looking at growth of about 1.4 million b/d” for the year.
“With this strong demand growth and all the challenges that the non-OPEC supply is facing, I have my doubt on the projections of the IEA for 2018. You have had the various headwinds that the shale producers…are facing,” he said.
“It is expected normally for companies to put on a brave face, especially companies that are financed by private equity, to paint a very robust picture. We know that private equity is not patient capital.”
Barkindo said he would not pre-empt the OPEC’s next meeting, particularly while Saudi oil minister Khalid Al-Falih and Russian energy minister Alexander Novak consult with the countries involved.
However, he played down a claim by Total CEO Patrick Pouyanne on Wednesday that Saudi Arabia and Russia were targeting a $60/b oil price.
“As a matter of policy at OPEC we do not target price, but our member countries, for fiscal considerations…they have to have a certain price assumption for their budgets,” he said.
In his speech, Barkindo credited last year’s deal with inducing a “massive draining” of global oil stocks, saying that a balanced market “is now fully in sight”.
“There is far more light at the end of the dark tunnel we have been traveling down for the past three years,” he said.
“Today it is about how to sustain this balance,” he said in a press briefing. “Hence the call on us to construct a more institutionalized framework…We are working with the Russian and Saudis on how we can structure this platform to sustain it.”
“There is no doubt that this market is rebalancing at an accelerating pace,” Barkindo said, pegging compliance with quotas for September at 116%, an improvement on August.
“Stability is steadily returning.”
Ministers from the coalition of OPEC and non-OPEC countries were expected to discuss potentially extending their cut deal at the November 30 meeting.
Russia, in particular, has used the agreement to build closer ties with OPEC members, notably Saudi Arabia, whose King Salman recently visited Moscow.
President Vladimir Putin said Russia was keen to continue cooperation, though he did not see a need for Russia to join the organization.
OPEC has been keen to expand the coalition, with Venezuelan oil minister Eulogio Del Pino saying this month that a dozen, and even up to 16, other oil producers were being courted. Skeptics have questioned which other countries could be persuaded to make a meaningful contribution.
On the issue of shale production, Barkindo said the independent US producers needed to exercise “shared responsibility” and accused some of “playing the proverbial ostrich.”
However following a meeting with a group of shale producers chaired by Continental Resources head Harold Hamm earlier in the year, he claimed to detect a more positive attitude from some companies.
“You cannot have your cake and eat it. Hence we are beginning to see some of them coming out to say we have to be mindful of fiscal discipline. The funding they are getting from Wall Street is not continuing at the pace and level that they were getting,” he said.
“Considerations are gradually moving from volume to value. No producer is immune from the negative consequences of this cycle. They are beginning to ask themselves pertinent questions on how to proceed in a more responsible manner.”