15. The International Energy Forum will find this week place in Algeria, where OPEC members will meet Russia in the informal conversations about a potential produksjonsfrysavtale.
The previous attempt to get to such an agreement collapsed in Doha in april, when Saudi Arabia pulled out because Iran refused to participate.
But also this time many manufacturers are in conflicts of interest, says Bloomberg. Iraq and Nigeria are determined to resume the lost production, while Russia and Saudi Arabia produce at record-high levels.
the Chin to cut production (“the catch of cutting”), and that OPEC must take into the assessment of its production strategy, is that the volumes OPEC and Russia decides to cut sooner or later come back to the market again, writes chief analyst for commodities at SEB, Bjarne Schieldrop, in its ukesrapport.
- Oil cut coming back
He shows that the production of the entire 2.5 million barrels a day disappeared from OPECs members when the unrest escalated in the middle East in 2011 including Iran lost due to international sanctions.
These volumes will naturally come back to the market. So far this year Iran has returned to the market, and the current production of 3.6 million barrels is not far away from the level before the sanctions (of about 3.9 million barrels per day). However, according to the EIA-report from september, we have among OPEC members still around two million barrels per day of interrupted production waiting to come back into the market, continues Schieldrop.
The last signal is, according to the analyst that Libya is preparing the resumption of exports in the wake of political progress in the country.
It remains to be seen if Libya comes back to the market now, but come back they will sooner or later. If Russia and OPEC decides to cut, will the volumes that could potentially be on the sidelines sooner or later return when the market improves. But what this means, is that we not only have a buffer of high oljelagre that needs to be drawn when conditions are better. We will also have a produksjonsbuffer that gradually will be phased back into the market at better times, writes Schieldrop.
According to SEB-analyst can cut in production could potentially extend the time horizon for when the oil market to eventually ask for more oil from the producers.
- First overskuddslagrene pulled down. So must produksjonsbufferen be taken advantage of again, until the manufacturers generally may finally start to increase production again, continues
- More than Saudi Arabia against Iran
If this had only been about Saudi Arabia against Iran, would the OPEC according to the analyst not had the big problem with cutting or freezing the production.
- But this is just as much about the two million barrels per day of interrupted production waiting to come back into the market. When both Libya and Nigeria indicate that they are close by to resume production (true or not), we believe OPEC in no way can reach agreement on the cuts or the freeze at the meeting in Algeria this week, writes Schieldrop further.
- But if Libya and Nigeria resuming the production, it becomes even more imperative for OPEC to find one or another solution to avoid that the Brent oil settles below $ 45 in a good while ahead, he adds.
Schieldrop seem yet not it is so miserable to in the oil market, and shows that the weekly oljelagre in general is in a downward trend.
- Even though OPEC is producing 34 million barrels per day next year, we believe still there is space to 8.6 million barrels per day from the united STATES – although this provides little room to pull down on the high oljelagre in 2017. Probably we see a krisemaksimering in advance of the Algeria-meeting, a sort of attempt to spice up krisestemningen to increase the chance for a kind of solution – in the hope of a higher oil price, continues Schieldrop.
We do not believe in any solution or decision at the meeting. But believe OPEC members will show a kind of united front, as the last time they met in June, quit SEB-analyst.
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