OPEC+ saves oil for another year
The decision of OPEC and non-OPEC producers to extend oil output cuts until the end of 2018 had a positive effect on the oil marketsю
Brent crude oil for February delivery are at $63.13 a barrel, and U.S. West Texas Intermediate crude are at $57.69.
A senior analyst of 'Uralsib Capital', Alexei Kokin, speaking to Vestnik Kavkaza, noted that except for a single positive surge in prices immediately after the announcement of the deals'd extension, this event will not have a noticeable effect on the oil markets - it will only keep the current price levels. "The thing is that the market's assessment of the probability of this event was high. Nobody expected different from this meeting, that is, the expectation of an extension of the deal before the end of 2018 was already included in current oil prices. In addition, in June, the parties to the agreement intend to take a fresh look on the outcome of the deal - apparently, the mechanism of getting out of it will be discussed," he predicts.
The analyst pointed out that the extension of the deal will not necessarily neutralize the negative trends in the oil market. "Nobody is sure that the deal will create an oil deficit in 2018. OPEC relies on the fact that in the second half of 2018, the deficit in the market will be very significant - more than 1.5 million barrels a day, but many don't agree. If there is no balance, oil prices will gradually weaken, and we can return to $50 per barrel, and even lower," Alexei Kokin said.
Speaking about the results of the first year of the deal with OPEC, the expert acknowledged that the participants managed to achieve a positive impact on prices. "However, only half of the way has been passed - reserves should be reduced by the same amount as they fell in a year. For this purpose, it is necessary to create an oil deficit that would drain existing reserves. The goal on prices was achieved, the only question is how stable they are," a senior analyst of 'Uralsib Capital' concluded.
A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, noted that the participants in the deal are counting, first of all, on maintaining the current state of affairs in the oil market. "We see that the price has gradually grown since the signing of the agreement. If the deal were not extended, traders would immediately sell futures. They would have accepted the refusal to extend the deal as a transition to a situation where everyone extracts the maximum, which would return an overabundance of oil in the world market with a decline in prices," he drew attention.
"The extension of the deal before the end of 2018 will not cause a sharp price increase as a year ago, but will allow prices to continue growing with the prospect of reaching the threshold of $70 per barrel. Prices will not decline sharply and the world will not plunge into the price war of all against all. The only negative for participants in the deal is that countries that do not participate in it, in particular, the United States, benefit from the agreement," Igor Yushkov emphasized.