OPEC reconquered its partners for a difficult decline in production


On Friday OPEC will find its partners, including Russia, to discuss a possible joint decline in their oil production to stop the observed price decline for two months, after failing Thursday to agree on the subject.

"No, I am not confident" that an agreement will be reached, acknowledged Saudi energy minister Khaled al-Faleh after a long day of negotiations at the headquarters of the Organization of Petroleum Exporting Countries (OPEC) in Vienna.

However, producers agree on a problem: supply exceeds demand and led to a fall in prices of over 30% in two months. An evolution that satisfies consumers, but not the producers themselves who are very dependent on oil revenues.

For OPEC and its allies, an alliance of 25 countries in total providing about half of the world's offer, it would be virtuous to slow down the pace.

But the heavyweights of black gold all have reasons, more or less official, to await the efforts of the other producers.

For Russia, which leads OPEC partners, it is therefore "much more difficult to reduce than other countries, given our climatic conditions", Russian Energy Minister Alexander Novak said on Thursday St.Pietroburgo.

Saudi Arabia, for its part, faces the pressure of the United States at a time when the kingdom is weakened by the diplomatic repercussions of the Khashoggi case. On Wednesday, President Donald Trump asked OPEC, which pumps a third of world crude, keeping its production at a high level.

If al-Faleh said that Washington "is not in a position to tell us what we have to do", the million barrels a day falls for the group of producers that has proposed lower than expected by the markets, further decline in prices.

His geopolitical rival and the third-largest producer of OPEC, Iran, has proposed a sharper cut … while asking to be exempted from any cuts, considering the oil sector already hit by US sanctions.

– The markets are not convinced –

The issue of exemptions, which also Venezuela and Libya would require, according to the Bloomberg agency, could be crucial in Friday's negotiations, as well as the level and timing of a possible decline in Russian extractions.

OPEC has not announced a failed interview, however, and Iraq's oil minister Thamir Abbas Al Ghadhban said he has "hope" for Friday's talks.

The uncertainties on oil contributed Thursday to the decline of European stock markets and precipitated the price of Brent, the European reference, which is momentarily stretched under the symbolic threshold of 60 dollars.

On Wednesday, the London brokerage firm PVM estimated that a lack of production decline would trigger "a frenzy of sales in biblical proportions and guarantee a return to an excess of global oil".

For analysts, a possible agreement on a decline in production should be examined, because its details dictate the price movement.

"A drop of one million barrels" for the entire group, as is assessing Saudi Arabia, "should support prices", provided, however, that Iran is not included in this count, explained to AFP Abhishek Deshpande, analyst of JPMorgan.

This decline would be in addition to the one already planned due to American sanctions, the placing on the market by Iran.

In June, producers relaxed their discipline with the goal of allowing Russia and Saudi Arabia to extract more to offset the expected losses of Iranian barrels due to the reintegration of US nuclear-related sanctions .

However, US temporary exemptions to eight importing countries, at levels higher than those expected by the market, have contributed to the collapse in prices over the last two months, canceling gains from the beginning of 2017.


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