LONDON: OPEC and non-OPEC countries, including Russia, patched up their differences yesterday and agreed to a nine month extension to oil output cuts first agreed in December 2016 after the price fell as low as $30 per barrel.
The current deal, under which producers agreed to cut supply by about 1.8 million barrels per day, was due to expire in March 2018, but will now be extended till the end of next year following a meeting in Vienna.
Markets breathed a sigh of relief as the current tariff of about $62 per barrel was viewed as factoring in an extension of production curbs that have helped the price recover by around 38 percent since last December’s $45 per barrel.
Robust global economic growth has also been a major factor, and there has been a significant reduction in global inventories as producer countries combined forces in a bid to bring supply and demand back into balance.
There will be wriggle room for the agreed cuts to lapse in the event of the market overheating. Additionally, there remains uncertainty as to the “trigger” price that could see US shale operators suddenly ramp up supply, raising the spectre of another glut.
The new agreement seeks to involve Opec members Nigeria and Libya, which were not signatories to the earlier accords.
The Vienna accord is a geopolitical and diplomatic win for Saudi Arabia, by far Opec’s largest supplier, as its leaders would appear to have persuaded Russia to go along with an extension even though some Russian suppliers have lobbied for the agreement to be scrapped as Russia needs lower oil prices to balance its budget than KSA.
But last month’s visit to Moscow by King Salman who met Vladimir Putin underlined the development of a more positive relationship between the two countries. Both have an interest in maintaining a balanced oil market.
The state visit was the first by a reigning Saudi monarch and came despite Russian support for Iranian-backed forces in Syria.
In Austria yesterday, Saudi Energy Minister Khalid Al-Falih told the gathering that in May the OECD stock overhang was 280 million barrels above the moving five-year average, but it had since fallen by almost half to 140 million barrels for the month of October.
He said: “All in all, market stability has improved and sentiment is generally upbeat. The rebalancing trend (towards the five year average) has accelerated and inventories are on a generally declining trend.”
Compliance with the production targets by the combined OPEC 12 was around 100 percent and OPEC’s credibility had been enhanced, although a couple of members had “lagged” behind, he said.
He added: “To succeed going forward, it is essential that we continue to maintain unity within OPEC. But let me hasten to add that without the support of our non-OPEC partners, the encouraging situation we see today would not have been achieved. So, we should seek to institutionalize the OPEC and non-OPEC cooperation framework, and further build on the healthy foundation we have laid.”
OPEC and Russia agree extension to oil output cuts
OPEC and Russia agree extension to oil output cuts
Free trade negotiations between GCC, India mark new phase of partnership, says sec-gen
RIYADH: The Gulf Cooperation Council’s secretary-general affirmed that the negotiations for a free trade agreement between the GCC and India, and the signing of the joint statement, represents a new phase of strategic partnership.
Jasem Mohamed Al-Budaiwi said that this contributes to enhancing close cooperation and strengthening economic and trade ties, according to the Saudi Press Agency.
This came during the signing ceremony of the joint statement on launching the free trade agreement negotiations between the Al-Budaiwi and India’s Minister of Commerce and Industry, Piyush Goyal, which took place in New Delhi, on Tuesday.
During the signing ceremony, Al-Budaiwi said that the Terms of Reference, signed on Feb. 5, provide a comprehensive and clear framework for these negotiations. The two nations agreed to discuss enhancing cooperation in vital strategic areas, including trade in goods, customs procedures, and services.
Additionally, the framework covers Sanitary and Phytosanitary measures, intellectual property rights, cooperation on Micro, Small, and Medium Enterprises, along with other topics of mutual interest. This reflects the comprehensive nature of the agreement and its ability to keep pace with the future economy.
Al-Budaiwi expressed hope that these negotiations would lead to a comprehensive and ambitious free trade agreement that works to remove customs and non-customs barriers, enhance the flow of quality investments in both directions, and achieve further liberalization in trade and investment cooperation between the GCC and India for mutual benefit.
This would provide a stimulating economic environment and an investment climate that opens broad horizons for the business sector, supports supply chains, and accelerates the pace of economic growth in line with the ambitious developmental visions of the GCC states.
The top official affirmed the full readiness of the General Secretariat to host the first round of negotiations at its headquarters in Riyadh during the second half of this year.
The two sides held a meeting during which they reviewed the existing cooperation relations between the GCC and India and discussed ways to develop and elevate them to broader horizons, serving mutual interests and enhancing opportunities for strategic partnership between the two sides, particularly in the economic, investment, and trade fields.
They praised the role undertaken by the negotiating teams from both sides, appreciating the efforts contributing to reaching a comprehensive agreement that enhances economic integration and supports the smooth flow of trade between the two nations.
