Waiting for oil at $40


Нефть ждут по $40

The head of OPEC States that the cartel countries and independent producers are ready to conclude a final agreement on limiting oil production. However, the market did not believe him — on a barrel of oil fell $1, breaking below $48. At Goldman Sachs believe that, if agreement is not reached, the price of Brent crude could fall to $40 a barrel.

Agreed, but not all

All members of the Organization of countries — exporters of oil, as well as major producers outside the cartel (including Russia), intend to finalize an agreement to freeze the level of oil production, said the OPEC Secretary General Mohammed Barkindo in an interview with Bloomberg. According to him, at a meeting held last Friday, experts of the OPEC countries “made significant progress”.

As stated Barkindo, ready to play even Iraq, which previously required special conditions. According to genseka OPEC, there will be no exceptions for anyone.

Iraq said earlier that it is freezing production level (which, according to Iraq, in fact means reducing) shouldn’t extend. As announced on 23 October, the Minister of oil of Iraq Jabber al-Laibi, this is due to the fact that the country is “brutal war” against the Islamic state (a terrorist group banned in Russia). In this regard, al-Laibi turned to other countries with a request for the release of Iraq from any obligations to reduce production levels. Earlier, the head of the Iraqi state oil company SOMO Falah al-Amri said that the question of the level of production is a matter of national sovereignty of Iraq.

According to al-Amri, if not oil war, which affected Iraq, the country is now extracted would not be 4.7 million barrels and 9 million barrels per day.

Russia has previously stated that it will not cut production, but are ready to commit. However, not earlier than the OPEC countries will agree among themselves. To the question about the results of the consultation on the freezing press Secretary of the President of Russia Vladimir Putin Dmitry Peskov said on Monday that Russia hopes to reach consensus.

Barkindo also expressed the hope that the final agreement will be reached on 30 November at the OPEC meeting in Vienna.

It is significant that the statement of the Secretary General of OPEC came amid falling oil prices, caused by the fact that the market questioned the agreement.

The market believed for a while

The price of a barrel of Brent crude on the Intercontinental exchange ICE in London on 31 October for the first time in a month fell below $49. 1 November at 22: 00 MSK Brent was worth $48,27.

“Now the market depends on expectations of the results of the meeting in Vienna and rates react mostly to the statements on this subject. Is speculation on verbal interventions,” commented the analyst of Raiffeisenbank Andrey Polischuk, who believes that the upward adjustment occurred on the statements Barkindo.

However, in an interview Barkindo mentioned that the share of Iran, Iraq and even Venezuela to the agreement on the freezing still open to question, although, according to him, this will not prevent in the end to agree. But apparently, verbal intervention is not enough. Once past Vienna this weekend’s meeting of OPEC technical experts it is low estimate chances of the fact that the manufacturers reached agreement to limit oil production.

“In our opinion, the chances of announced plans to reduce production and oil reserves is very much reduced for this week,” I believe in Goldman Sachs.

If agreement cannot be reached at a formal meeting of the cartel on November 30, the price of Brent crude could fall to $40 a barrel, following today’s report.

The analysts of Goldman Sachs revised its forecast for oil production in Russia in 2017 from 11.4 million to 11.7 million barrels per day, TASS quoted the report of the Bank. “Russia is stepping up production faster than we expected,” the report says.

The combined production of Russia and OPEC countries in 2017 may reach 45 million barrels per day if the cartel countries and the Russian Federation agree to a proposal by Saudi Arabia to cut production by 4%, analysts say.

“The number of short orders for Brent in the next two weeks, increased by 40%,” writes International Business Times, citing analysts from JBC Energy.

According to respondents edition experts, fundamental in the oil market do not change, the excess supply remains, moreover, it grows. So, if OPEC and Russia can not agree on production cuts, oil prices should fall.

OPEC ramping up production

In late September, OPEC agreed to limit production at 32.5 million barrels per day. In August, the cartel produced 33,174 million, and in September — 33,394 million barrels a day. Previously, it had been proposed to reduce the total production of OPEC countries at 796 thousand barrels per day.

A major role, according to the proposal of Algeria should play Saudi Arabia: it will have to cut production by 442 thousand barrels to 10.1 million barrels. Nigeria and Libya proposed to exempt from the reduction. But Iran is to allow even a few to increase production to 3.7 million barrels per day, which is 52 thousand barrels more than the Islamic Republic was mined in August.

However, this all makes sense if you start from OPEC production in August and provide a number of countries, special conditions, contrary to the words of Muhammad Barkindo.

If to start production September, the reduction would be almost 900 thousand barrels per day. And it is still unknown what the results will show the OPEC for October (statistics are published in the middle of next month). According to JBC Energy, in October, the range of OPEC countries increased by 50 thousand barrels per day.

Andrey Polishchuk, however, believes that the agreement may be concluded with the granting to any of the producers preferences for the extraction.

Earlier, market experts have repeatedly said that the General idea of the statements of agreement about the freezing — it was in the statements. This ensures that the price of a barrel, but in reality to capture prey, no one is going to lose market share. Also, do not forget that in negotiations about the freezing not part of the United States, and their level of production and the number of drill are of great importance to world prices.


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