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Barkindo stresses ongoing co-operation, not exit

12 Feb 2018 15:40 GMT
Barkindo stresses ongoing co-operation, not exit

Cairo, 12 February (Argus) — Opec secretary general Mohammed Barkindo said today that "the lexicon of 'exit' is not found in our vocabulary", laying emphasis on long term co-operation between Opec, Russia and other producer countries, to maintain market balance once it is achieved.

Speaking on the fringes of a conference in Egypt, he batted away questions about whether there are currently discussions on how to unwind the agreement to take a net 1.7mn b/d out of the market. That agreement currently expires at the end of this year, having been in force since January 2017.

Recently, Saudi Arabia's oil minister Khalid al-Falih suggested that talks on how to unwind the cuts without flooding the market might begin in the second half of this year.

But, key participants in the cuts look to be edging towards a 'soft exit' that might keep mechanisms in place for future market intervention.

Barkindo, who is Opec's top civil servant and not a policy maker, reflected this in his comments today. He said: "We are all in the same boat. We have developed a bond now over the past year or two of working together, and it is in the interest of [all] of us, Opec and Russia and other non-Opec countries as well, to continue in this fashion beyond the rebalanced market ... we have a common objective and that is not only to restore stability but to sustain it on a sustainable basis going forward."

He also said: "All parties, wherever I visit, ask the same question: What are you doing to ensure that this co-operation continues beyond a rebalanced market? So, countries like Venezuela minister Manuel Quevedo is of the opinion that we should look at a timeframe of probably five years. So, it is work in progress, we welcome proposals, suggestions, guidance from all participating countries on the elements for this permanent framework."

Venezuela's call for a five-year deal did not come in isolation. Al-Falih has said a slow market rebalancing or indications of a global stockbuild could push governments to roll the cuts into 2019, and that the success of the supply restraint accord is prompting him to seek a "drive towards permanency".

Non-Opec Russia has long recognised the dangers of not having an exit strategy. Today, oil minister Alexander Novak remarked: "Most likely, the exit from the deal will take several months. More precisely, the period of gradual increase in production can be calculated directly at the moment of making a decision to withdraw from the agreement. It can take three, four, five months — and maybe vice versa, only two."

But he too indicated that a longer period of output restraint might be in order, saying: "It is possible that the target reduction in world oil reserves may occur before the end of 2018. Everything will depend on the situation on the market, on how quickly it will be balanced... And, as soon as we reach the targets for the world's oil reserves, once we understand that the goal has been achieved, we will all gather together and work out a mechanism for further action."