Goldman sees hard to Opec+ extension for Russia, Saudis | 2019-06-13 | daily-sun.com

Goldman sees hard to Opec+ extension for Russia, Saudis

12th June, 2019 09:50:11 printer

Moscow: Uncertainty over oil supply and demand fundamentals is making it tougher for Russia and Saudi Arabia — the architects of the Opec+ deal — to reconcile their differences over the framework for an extension of their output pact into the second half, according to Goldman Sachs Group Inc, report agencies.

Current demand growth “neither will support exiting the production agreement, nor is bad enough to reinforce more cuts,” Goldman Sachs Head of Commodity Research Jeffrey Currie said in an interview in St. Petersburg. Combined with uncertainty over Iranian exports and growing US shale output, it “becomes increasingly difficult to know what production levels will balance the market.”

As the Organisation of Petroleum Exporting Countries and its allies prepare to discuss the output cap in Vienna, oil analysts are weighing the chances of a potential oversupply amid slower demand growth. A weakening in consumption may require the group to extend cuts, a task which Russia may not be ready to sign up to.

“It’s much easier to unify a position, when there is a supply disruption or a strong demand, then both Russia and Saudi Arabia want to grow production,” Currie said on the sidelines of the St. Petersburg International Economic Forum on Friday. But now “it’s a very middling environment. This makes those tensions between Russia and Saudi Arabia more apparent.”

Saudi Arabia’s Energy Minister Khalid Al Falih is sure “the deal is almost in the bag” for Opec and some adjustments may be made for non-Opec members. Russian Energy Minister Alexander Novak meanwhile has adopted a wait-and-see approach, saying more time is needed and said a unifying position can be developed closer to the Opec+ meeting.

Novak is being pulled both ways. The nation’s biggest oil producer Rosneft PJSC warned an extension would lead to a loss of market share to the US. Meanwhile, Finance Minister Anton Siluanov said any failure to reach a deal could send prices to $40 a barrel — the level used to draft the Russian budget — or even lower.


Top