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2018-04-02 09:25:00

LONG-TERM OPEC COOPERATION

LONG-TERM OPEC COOPERATION

SHANA - A landmark deal between OPEC and non-OPEC oil producers on reducing oil output to help shore up prices is viewed as a significant event in world markets. Oil prices have rallied and the oil market has entered a new phase.

In addition to the production cut deal extension by the end of the year in favor of market balance, some OPEC members have made remarks hinting at the start of a new phase in cooperation between OPEC and non-OPEC states.

In light of new developments, it would be extremely important to find an answer to the following question: Can OPEC and non-OPEC deal on output levels lead to their sustainable cooperation?

In their November 30, 2016 ministerial meeting, member states of the Organization of the Petroleum Exporting Countries agreed to reduce their output by 1.2 mb/d to bring their output to 32.5 mb/d. Ten days later, OPEC won over non-OPEC oil producers Russia, Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan. The non-OPEC producers agreed to cut their total output by 600 tb/d; therefore, global oil supply was slashed by 1.8 mb/d at the start of 2017.

In its 172nd ministerial meeting, OPEC agreed to extend the deal up to March 2018 and then decided in its 173rd meeting to prolong it up to the end of 2018, and non-OPEC oil producers agreed with this decision.

The agreement was achieved amid growing speculation about the possibility of some OPEC and non-OPEC countries pulling out of the deal.

Attractive Idea

The extension of the deal and remarks by the United Arab Emirates minister of energy, Suhail al-Mazrouei, about the possibility of further cooperation between 14-member OPEC and 10 non-OPEC producers have strengthened the possibility of persistence of existing cooperation. The Emirati minister, who is currently holding the OPEC presidency, told the International Petroleum Week conference in London that some of the world's biggest producer nations were looking to establish a "structure" for long-term co-operation, following a supply curb deal among 24 countries: OPEC and outside OPEC.

He said leaders of the UAE, OPEC's biggest producer Saudi Arabia and non-OPEC member Russia support extending energy cooperation beyond 2018.

Meantime, Saudi oil minister Khalid al-Falih has called on oil producers to push ahead with their cooperation beyond 2018. He acknowledged that such cooperation may be envisaged within the framework of a new agreement instead of extending the current pact which began in January 2017, and will run until the end of 2018.

Undoubtedly, cooperation on the part of a politically influential oil producer like Russia would add to the weight and influence of OPEC in global energy markets, both politically and in terms of decision-making.

Furthermore, continued OPEC non-OPEC cooperation would send a direct message to countries like the US who plan to lift their shale oil production.

OPEC and non-OPEC oil producers may decide not to limit their agreement to output levels and introduce new elements into the agreement, like limiting shale oil production.

Apart from that, OPEC's willingness to expand cooperation with non-OPEC producers indicates a serious change in the member states' views. In the past, discrepancies between some OPEC members had blocked achievement of any comprehensive agreement within this organization. But under new circumstances, OPEC has not only reached a solid agreement, but also is determined to extend its cooperation to other countries. It shows that OPEC has entered a new phase of cooperation, in which the economic interests of member states are favored over their political differences and tendencies.

Obstacles and Challenges

In spite of all advantages of convergence between OPEC and non-OPEC oil producers, there are challenges and obstacles to such cooperation. For instance, a clear mechanism is yet to be worked out to show which rules OPEC and non-OPEC oil producers will need to follow in their future decision-making processes and discussions.

Yet it is not clear either whether all countries would give their nod to the new trend of convergence, particularly due to deep-seated differences between OPEC members. It is not known either whether all 10 non-OPEC oil producers would agree with this plan or a limited number of them would close ranks with OPEC.

It remains to be known whether such cooperation would push some non-OPEC countries to consider OPEC membership in the future. Throughout turn of time, cooperation between OPEC and non-OPEC oil producers may drive them to the conclusion that they need to dissolve OPEC and establish a broad-based organization subject to new rules and regulations. The issue of right to vote would be of high significance for both OPEC and non-OPEC nations in key decision-making processes. It has yet to be known which areas OPEC and non-OPEC cooperation would cover and which areas would be sidelined.

In conclusion, a logical and accurate mechanism needs to be worked out for future cooperation; otherwise, OPEC and non-OPEC cooperation would face tough challenges. Furthermore, any convergence between OPEC and non-OPEC countries requires full satisfaction of all member states and any unilateral action has to be avoided because that would lead to gaps within and even collapse of OPEC.

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Earlier:

 OPEC - RUSSIA ALLIANCE
2018, March, 30, 11:25:00

OPEC - RUSSIA ALLIANCE

REUTERS - “We are working to shift from a year-to-year agreement to a 10 to 20 year agreement,” the crown prince told Reuters in an interview in New York late on Monday. “We have agreement on the big picture, but not yet on the detail.”

 

 OPEC REDUCES SUPPLY
2018, March, 30, 11:20:00

OPEC REDUCES SUPPLY

REUTERS - OPEC, Russia and several other non-OPEC producers have curbed output since January 2017 to erase a global glut of crude that had built up since 2014. They have extended the pact until the end of 2018, and meet on June 22 to review policy.

 

 NEW OPEC RECORD: 138%
2018, March, 26, 08:00:00

NEW OPEC RECORD: 138%

OPEC - Participating OPEC and non-OPEC producing countries have set a new record in February with their voluntary production adjustments, achieving a level of 138%, according to the OPEC-non-OPEC Joint Ministerial Monitoring Committee (JMMC).

 

 OPEC OIL PRODUCTION: 32.19 MBD
2018, March, 16, 10:25:00

OPEC OIL PRODUCTION: 32.19 MBD

PLATTS - Demand for OPEC crude will average 32.61 million b/d in 2018, the organization calculated, a 200,000 b/d decrease from last month's projection.

 

 OPEC OIL PRICE: $66.85
2018, March, 9, 13:40:00

OPEC OIL PRICE: $66.85

OPEC - The OPEC Reference Basket increased for the fifth-straight month in January, gaining a sharp 7.7% to average $66.85/b, the highest monthly average since November 2014. Oil prices were supported by continuing efforts by OPEC and participating non-OPEC producers to balance the market and ten consecutive weeks of crude inventory draws amid healthy economic growth and improving oil demand.

 

 RESPONSIBILITY TO THE MARKET
2018, March, 5, 11:30:00

RESPONSIBILITY TO THE MARKET

REUTERS -“We all should look with responsibility to the market in order to keep the balance in the market as much as we can so as not to harm investors,” said Ali Nazar, Iraq’s national representative to OPEC.

 

 OPEC - RUSSIA COOPERATION
2018, February, 27, 14:00:00

OPEC - RUSSIA COOPERATION

PLATTS - "I think we are seeing more cooperation, and my hope is that this group of OPEC and non-OPEC will incentivize the adequate investments among themselves to ensure we have adequate supply in the market," he said. "My worry is not an oversupply. My worry is an undersupply. Everyone is expecting that we will have more demand coming in the future."

Tags: OPEC, RUSSIA, OIL, PRICE

Chronicle:

LONG-TERM OPEC COOPERATION
2018, October, 22, 11:55:00

RUSSIA - EXXON: NEW PROJECTS

BLOOMBERG - Russia has begun discussions with Exxon Mobil Corp. on possible new oil and gas projects, potentially creating a dilemma as the U.S. government mulls more sanctions against the country.

LONG-TERM OPEC COOPERATION
2018, October, 22, 11:50:00

IMF HAS UKRAINE FOR $3.9 BLN

IMF - The agreement reached today reflects the IMF’s commitment to continue to help Ukraine achieve stronger, sustainable, and inclusive economic growth. The new program has been developed in close coordination with the World Bank and the European Union, who have parallel operations to support Ukraine. The authorities’ steadfast and effective implementation will be critical for the program to achieve its objectives.

LONG-TERM OPEC COOPERATION
2018, October, 22, 11:45:00

UKRAINE'S GAS PRICES UP 23.5%

CNBC - Ukraine announced on Friday it would raise household gas prices by nearly a quarter as Prime Minister Volodymyr Groysman warned that the country risked default if it crashed out of its International Monetary Fund aid program.

LONG-TERM OPEC COOPERATION
2018, October, 22, 11:40:00

SCHLUMBERGER NET INCOME $644 MLN

Schlumberger Announces Third-Quarter 2018 Results Revenue of $8.5 billion increased 2% sequentially Pretax operating income of $1.2 billion increased 5% sequentially EPS was $0.46 Cash flow from operations was $1.8 billion Free cash flow was $1.0 billion

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