OPEC and allies prepare to deepen oil output cuts

Saudi Arabia's Minister of Energy Prince Abdul Aziz bin Salman arrives at the OPEC headquarters in Vienna, Austria December 5, 2019. (Reuters)
Updated 05 December 2019

OPEC and allies prepare to deepen oil output cuts

  • Saudi Energy Minister Prince Abdul Aziz bin Salman said he “feels good” about this week’s meetings
  • Russian Energy Minister Alexander Novak told Prince Abdulaziz on Thursday that Russia-Saudi energy cooperation should continue

VIENNA: OPEC and its allies led by Russia on Thursday were moving closer to agreeing one of the deepest output cuts this decade to support crude prices and prevent a glut, sources from OPEC and its allied producers said.
The Organization of the Petroleum Exporting Countries (OPEC) meets on Thursday in Vienna and with Russia and others, a grouping known as OPEC+, on Friday.
Three OPEC+ sources told Reuters on Thursday the group would discuss increasing current cuts of 1.2 million barrels per day by more than 400,000 bpd.
The current cuts expire in March and OPEC+ sources and delegates have said the new deal could be extended either to June or until the end of 2020.
Some sources and OPEC watchers have suggested the overall cut could be closer to 1.8-2.0 million bpd with new cuts and a push for better compliance with targets.
OPEC+ has curbed supply since 2017 to counter booming output from the United States, which has become the world’s biggest producer while also imposing sanctions on Iran and Venezuela to curb their oil exports.
Next year, rising production in the United States and other non-OPEC countries such as Brazil and Norway threaten to add to the glut.
In the past few months Trump has said little about OPEC but that might change later in 2020 if oil and gasoline prices rise — a politically sensitive issue as he seeks re-election in November.
Washington’s ongoing trade dispute with China has also clouded the economic and therefore oil demand outlook for 2020.
Saudi Energy Minister Prince Abdul Aziz bin Salman said he “feels good” about this week’s meetings but declined to comment on policy matters in Vienna.
Russian Energy Minister Alexander Novak told Prince Abdulaziz on Thursday that Russia-Saudi energy cooperation should continue, his ministry reported.
Oil minister Bijan Zangeneh of Iran, which is exempt from the cuts, said he would support a deeper cut if that was agreed by other producers.
Ministers from Saudi Arabia, Russia, Kuwait, the UAE, Algeria, Oman and Algeria began their pre-OPEC meeting at 11 GMT with the OPEC meeting not expected to start before 1400 GMT.
Saudi Arabia needs higher oil prices to support its budget revenue and the pending initial public offering (IPO) of state-owned oil giant Saudi Aramco with pricing of the IPO expected on Thursday.
OPEC’s actions have supported oil prices at around $50-$75 per barrel over the past year. Brent crude futures on Thursday extended this week’s gains to trade above $63 per barrel.
OPEC sources have also said Riyadh was pressing fellow members Iraq and Nigeria to improve their compliance with quotas, which could provide an additional reduction of up to 400,000 bpd.
Non-OPEC Russia has yet to agree to extend or deepen cuts from its current pledge of 228,000 bpd as its companies are arguing they are finding it tough to reduce output during winter months due to very low temperatures.
A source familiar with the Russian thinking told Reuters that Moscow would likely reach a deal with OPEC this week and just needed to iron out a few outstanding issues.
One sticking point for Russia is how its output is measured. Russia includes gas condensate in production figures, while other producers do not. Zangeneh said on Thursday that Russia’s stance on the matter was logical.


Frank Kane’s Davos diary: Swiss efficiency lapses, but so far Davos lives up to the cuckoo-clock image

Updated 22 January 2020

Frank Kane’s Davos diary: Swiss efficiency lapses, but so far Davos lives up to the cuckoo-clock image

Davos comes and Davos goes, but over the last five decades, the one thing you can rely on is Swiss efficiency, right? The trains run on time, the cuckoo clocks chime on the hour, and the snow is swept from the pathways within minutes of the first fake falling. That is the common (even cliched) view of the Alpine nation and its showpiece event, the World Economic Forum (WEF) annual meeting in Davos.

But — and whisper it very gently beneath your breath — maybe the legendary standards of Swiss efficiency are slipping as the WEF celebrates its 50th birthday. Evidence of a lapse from the highest levels of attainment came at Zurich Airport, when the luggage belt seized up inexplicably, and a full 10 minutes elapsedbefore a maintenance man came to attend to it. Tut tut.

Further signs of falling standards were on display at the railway station. The booking desks were besieged, as usual, by WEF delegates keen to complete the final leg of their journey up the Magic Mountain — a two-hour rail journey involving two stops at increasingly higher altitudes.

But only two of the 10 grills were manned, and the line grew longer and more grumpy with each passing minute. The mood was not helped when some trains were canceled and an extra hour was added to the journey. There was much muttering and dark looks shot when the train finally pulled into Klosters.

But thankfully, once you got to the heart of WEF-land, normal service was resumed. There had been a reasonable fall of snow that morning, which gave the place its usual fairytale appearance, but no traffic snarl ups as in previous years, when massive snowfall had caused the place to grind to a halt.

The shuttle buses that are the arterial life-channels of Davos — for those whose budgets do not extend to the black Mercedes limo — were running with their usual Swiss punctuality: Every 10 minutes or so, or even more frequently during peak rush hours.

These, in my experience over the past few years, are becoming frequently extended. Having battled through the registration process and attended one event at the nearby Seehof hotel, I imagined it would be easy to catch a ride on a virtually empty shuttle back to Klosters at around 9.30 p.m. But even at that hour, there was a long queue of unhappy souls waiting to make the same 20-minute trip to the other side of the mountain and their warm, welcoming hotel rooms.

It was the same thing on the opening morning of the annual meeting. I left my hotel — the homely and comfortable Cresta in Klosters — at 7 a.m. in the dark, and at minus 5 degrees Celsius. Again, there was a crowd of people standing huddled at the shuttle stop, shivering and stamping their feet.

The WEF shuttle service was up to the job, however, and I got into the Congress Hall with little trouble. The airport-style screening process — maybe a little more thorough than usual in view of the impending arrival of US President Donald Trump — passed smoothly. One request though: Please WEF, install some hot-air machines in the security hall. The body shock when you remove outer clothing to pass through the metal detectors was wicked.

Then down to business, which for a journalist at Davos means finding somewhere in the congress complex where you can rest a laptop while also providing a good people-watching vantage point. Over the years, I have learned that the Central Lounge — strategically located between the main plenary meeting halls and the (private) members lounge and bilateral rooms — is the perfect spot. Now, who will come my way in Davos 2020?