The November Opec and non-Opec gathering in Vienna looks set for a downgrade.
After the compliance meeting on 22 September, Russian oil minister Alexander Novak said the likely state of the market in April would not be discernible until early 2018. Yesterday, he was explicit: “We need to take a decision in the first quarter of 2018. In November we will certainly discuss the market situation and prospects, but it makes no sense to take a decision.”
As Russia is the non-Opec pillar of the market rebalancing cuts strategy, Novak’s opinion is weighty enough. Opec secretary general Mohammed Barkindo has now indicated a similar sentiment, saying: “Market fundamentals will show in 2018 [sic] whether to extend or not.” Barkindo is a civil servant not a policy maker but that he expressed a view suggests there is a groundswell of similar opinion among his members. With the Saudi royal entourage in Moscow, along with the great and the good of the oil ministry and Aramco, we may soon learn the view of the other principal pillar of the policy.
The next compliance meeting is scheduled to take place in Vienna just before the full ministerial jamboree. That will bring in a gaggle of ministers anyway, so it seems unlikely the latter will be scrapped but it may be Opec, non-Opec lite. Mull the market, lean on Libya and Nigeria to re-affirm their voluntary caps, maybe welcome in another minor producer or two, wrangle over the practicality and status of export monitoring, and get some admin done. Oh and then there’s the ever-popular Vienna Christmas market to visit.
The Saudi state visit to Moscow during Russian Energy Week, and the accompanying signing ceremonies are a nice anniversary celebration at the end of a full year of collaboration in oil market policy. That has been an impressive achievement. Once the market rebalances and the cuts are unwound, the marriage of convenience may well dissolve and the partners go their separate ways as competition for sales, not to mention geopolitical competition, pushes the partners apart. President Putin was asked whether Russia might join Opec. Of course, he said no. Russia wants to continue on its own path. And the Saudis would be horrified at the prospect of no longer being the alpha male of the organisation. Over the years they have slapped down challenges from Iran and Venezuela but keeping a producer with more barrels under its belt than Riyadh in its place would be impossible. Russia in Opec is in nobody’s interest.
So, if Opec is to pick up more members, it will be from the small fry. Uganda has expressed interest in joining when it starts producing in 2020-21. It would follow fellow small African producers Gabon and Equatorial Guinea into the fold — Gabon for the second time. Quite what the point of their membership is remains obscure. Venezuela is still agitating to get more non-Opec producer countries into the cuts agreement. Oil minister Eulogio Del Pino said “it would be a very positive message if we managed to include 12 more countries in the agreement”, indicating that conversations had taken place with Egypt, Chad and others. A good bit of PR perhaps, but few barrels in it.