BAKU, Azerbaijan, April 4
By Leman Zeynalova - Trend:
Proposed 15 million barrels per day (bpd) cut should be divided among all, not just Saudi Arabia and Russia, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and Global Head Strategy Risk at Berry Commodities told Trend.
He was commenting on the upcoming meeting of OPEC+ ministers.
“My own expectations are that the outcome will be very disappointing. The main reason behind this is that it is almost impossible to get National Oils (NOCs) on the same line with privately owned companies such as US shale. To bring in Washington is for media, as Washington doesn’t have the bite to force independent oils to cut on their will. At the same time OPEC+ is at present also not on the same strategy, look at Saudi Arabia and Russia. Both want to increase market share while asking OPEC+ and others if there is a need to cut 10-15 million bpd that this should be divided by all countries, not again only Saudi-Russia-UAE. The rest should take a full cut too. The latter will not be in the mind of most, all are looking at Saudi-Russia. These two are not able to take a huge cut as others will just fill it in,” said Widdershoven.
The main threat is that if OPEC+ will cut right now, the cartel and Russia are out of any instruments anymore to react, said the expert.
“Also, any cut at present will not be substantial as there is a major demand destruction (17-20 million bpd) worldwide, which is not due to market fundamentals but due the coronavirus. All also know that even with a cut, there is too much oil already on the market, results will be negative in the end,” he added.
That deal is never going to happen. only an option if 10-15 million is divided over Saudi-Russia, rest of OPEC, and Canada, US, North Sea, Mexico, Brazil and all others, Widdershoven concluded.
Oil-producing countries, including the OPEC+ group and others, will be holding an online meeting on April 6, inspiring optimism that the market can be brought back to equilibrium more quickly than through the grinding attrition caused by low prices.
The rally began on Thursday, when President Donald Trump announced that he had he spoken to President Vladimir Putin of Russia and Crown Prince Mohammed bin Salman of Saudi Arabia, and that he expected them to cut production by up to “15 million barrels”.
Assuming that the unspoken but implied “per day” is added, that would be a scale of reduction commensurate with the shock to demand. World oil consumption in the second quarter is on course to average about 8.1 million barrels per day less than in the same period of last year, according to Wood Mackenzie’s Macro Oils service.
---
Follow the author on Twitter: @Lyaman_Zeyn