Why Kuwait so confident of expediency to end OPEC deal?
Baku, Azerbaijan, Dec.12
By Leman Zeynalova – Trend:
It is easy for Kuwait to be so confident about OPEC's future plans and to make public commitment to end the deal in 2019, Gal Luft, the co-director of the Washington-based Institute for the Analysis of Global Security, told Trend.
He was commenting on the remarks made recently by Kuwait’s minister of oil, electricity and water Essam Al Marzouk that OPEC and participating non-OPEC countries may end the deal on oil production cut by late 2018.
“In accordance with the agreement, we still have a whole year, but it is likely that we will exit the deal before early 2019, if the market recovers by June,” he said.
Maybe Kuwaiti minister believes that the production cut will soon deliver the desired outcome and bump prices up to alleviate the financial strains of some OPEC and non-OPEC countries, said Luft.
“This way there will not be a need to extend the deal. But his prediction is as good as anybody's.
So much will happen to the world economy and geopolitics between now and 2019 that I wouldn't read too much into those statements. We don't know what will happen in Venezuela, Saudi Arabia, the US dollar, China's demand and the global economic condition. All of those variables and others can easily rattle the market,” added the expert.
Luft noted that after all, of all of OPEC members Kuwait has by far the lowest fiscal breakeven price per barrel and it is perhaps the only OPEC country that can sustain itself on the current price level.
“The same is not true for the other members, as some of them need prices to be three or four times higher than what Kuwait needs. So the minister may be talking for his own country - not the rest of them,” he said.
Earlier, OPEC announced that it, along with Russia and several other non-OPEC producers, had reached an agreement to extend its production deal for a further nine months. This would shift the expiration date of the agreement from March to the end of 2018. The agreement is on the same terms as those agreed in November last year.
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