OPEC, Russia to announce extension to crude oil cut agreement

Saudi Arabia and Russia have agreed that Organization of Petroleum Exporting Countries (OPEC) and non-OPEC allies should announce an extension of the cuts at the highly-anticipated meeting in Vienna on November 30, Bloomberg quoted people familiar with the talks.

Recent OPEC/non-OPEC oil pact chatter had it that Saudi Arabia was pushing for an announcement of the cuts extension next week in Vienna, while Russia was more hesitant about telling the market on November 30 how the participants in the deal would act. Russia appeared to be stalling and playing for an announcement to be issued closer to the current expiration deadline of the deal, March 2018.

According to Bloomberg’s sources, now Russia and Saudi Arabia have agreed on the need to announce some sort of a deal next week, but Russia has insisted on additional phrasing in the extension deal that would link the size of the cuts to the state of the oil market.

While OPEC and Russia have agreed on a general framework, discussions are ongoing as to how OPEC could meet Russia’s demands, including how to include a link between the size of the cuts and the state of the rebalancing of the oil market. There are also discussions about including an option to review the pact again in early 2018, including calling a new meeting, according to Bloomberg’s sources.

As of last week, not all Russian oil companies were on board with extending the cuts, and they were said to have discussed a six-month extension with Energy Minister Alexander Novak.

Novak, for his part, said that some 50 per cent of the global oil oversupply had been erased and Brent prices had risen to an “acceptable enough” level of more than $60 a barrel.

Nevertheless, the oil market is not yet balanced and the pact needs to be extended, Novak said, adding that Russia supports an extension, and various options are being discussed. Details will be discussed at the Vienna meeting on Thursday,” he noted.