Tough OPEC meeting looms amid specter of
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[November 28, 2017]
By Maha El Dahan and Rania El Gamal
DUBAI/VIENNA (Reuters) - OPEC is heading
for tougher-than-expected policy talks this week amid concern that its
efforts to rebalance the oil market might overshoot by creating a global
deficit and spurring a further price rally.
"It will not be an easy meeting and we always look at various
scenarios," United Arab Emirates Energy Minister Suhail bin Mohammed
al-Mazroui said on Tuesday in Dubai before leaving for the gathering of
the Organization of the Petroleum Exporting Countries in Vienna.
OPEC, Russia and nine other producers are cutting oil output by about
1.8 million barrels per day until March 2018, and on Thursday will
discuss extending the deal. The market had largely expected OPEC to
prolong cuts until the end of 2018 but doubts have emerged in the last
OPEC's leader Saudi Arabia has signaled that it wants oil to trade at
about $60 per barrel as the kingdom prepares to list shares in its
national oil champion Aramco and is still fighting a large fiscal
The Russian government also wants high oil prices ahead of a
presidential election in March 2018. But officials in Moscow have voiced
worries about pricier oil boosting the rouble, which could undermine the
competitiveness of Russia's economy.
As oil rallied above $60 per barrel, U.S. producers aggressively hedged
their future production, raising fears of another spike in shale output
in the United States, which is not participating in the global
Goldman Sachs, one of the most active banks in commodity trading and oil
producer hedging, said on Tuesday the outcome of the OPEC meeting was
"The absence of such a consensus is due to the uncertainty on the
progress of the oil market rebalancing as well as Brent oil prices
trading at $63 per barrel," the U.S. bank said in a note.
"The push for a nine-month extension, four months before the cuts end
and given an accelerating rebalancing further stands in the face of
prior comments that the cuts should remain data-dependent to assess
GRADUAL OUTPUT BOOST
U.S. oil prices fell more than 1 percent on Monday and eased further on
Tuesday from a two-year high reached last week. [O/R]
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A boat is seen close to oil installations at Lake Maracaibo in
Cabimas, Venezuela October 5, 2017. REUTERS/Isaac Urrutia
Goldman said oil might fall further this week as the market had
priced in a nine-month extension.
"We continue to expect a gradual ramp up in OPEC and Russian
production from April onward," Goldman said, adding "as a result,
the announcement of an only six-month extension would still
initially appear bullish relative to our expectation".
On Friday, Russia said it was ready to support extending the
output-cutting deal but had still to decide on the duration.
On Monday, Reuters reported that a major Russian production project
led by Exxon Mobil was preparing to ramp up output by a quarter from
The project is not subject to the global output-cutting deal but the
development would signal an obstacle to Russia's efforts on
The Exxon project involves Rosneft, the Kremlin-owned state producer
whose boss Igor Sechin, a close ally of President Vladimir Putin,
has long been a critic of Moscow's deal with the 14-country OPEC.
Sources close to talks between OPEC and Russia told Reuters Moscow
wanted to fine-tune the language of the deal to include an option to
review the agreement if global stocks fell steeply.
The supply pact is aimed at reducing oil stocks inindustrialized
countries to their five-year average. Thelatest figures suggest OPEC
is more than halfway there, with OPEC sources saying the target
could be reached after June 2018.
(Writing by Dmitry Zhdannikov; Editing by Dale Hudson)
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