Baku, Azerbaijan, Nov. 29
By Leman Zeynalova – Trend:
The success of OPEC’s upcoming Vienna meeting is above 90 percent, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend Nov. 29.
“Main players are willing to get their act together, in which Saudi Arabia and Russia are showing their power at present,” he said.
In September, OPEC producers agreed during an informal meeting in Algiers to cut down the oil output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd. How much each country will produce is to be decided at the next formal meeting of OPEC on Nov. 30 in Vienna.
The expert pointed out that Saudi Arabia is very much interested in this deal, as it will push valuation of its ARAMCO IPO in 2017 to higher levels.
“A crude oil price increase will be bringing in additional billions of dollars to Saudi Arabia, which all parties involved are very much interested in,” Widdershoven added.
As for non-OPEC countries, the expert said that main issues for Moscow are Saudi Arabian and other Arab OPEC producers’ requests that non-OPEC countries, such as Russia, Canada and the US, cut at the same levels.
“Russia will try to have a geopolitical assessment in place, in which it will give into the requests of Arab OPEC members to cut, as this will additionally give it some positive feedback from Saudi-UAE and possibly others on MENA-related (Middle East and North Africa) issues at present,” he said.
However, the expert believes that the US will not commit itself to production cuts.
“In a free-market situation, the US government is not at all able to force production cuts on its privatized companies or IOCs (international oil companies),” explained Widdershoven.
But shale oil will not be making such a large impact on the market in which production is even expected to fall in 2017-2018 due to very low investment or capital expenditures in the last 3 years, according to the expert.
“Decline of production is imminent in large parts of the world, so oil prices will be hitting higher levels for sure. Cuts at present are just to show the power of OPEC and non-OPEC members to have a say in the market,” he added.
Widdershoven pointed out that success is however a small issue, as the market is looking for guidance and some positive news to look forward to higher price levels and lower excess oil volumes in 2017.
It is needed, to keep production levels at volumes needed, as more and more it is becoming clear that production and supply are reaching a breaking point, he said, adding that supply will be lagging behind, while demand is growing steadily.
“Somewhere in the next months we will see more and more information that the oil glut is over. We are reaching a different situation very soon,” said the expert.