OPEC deal to become more global

OPEC deal to become more global

Egypt, Norway and Turkmenistan made signs of their willingness to join the oil production cuts, Kuwait's oil minister Essam al-Marzouq said.

The minister noted that  Saudi Energy Minister Khalid al-Falih said on Monday he expected the new deal to be similar to the old one, "with minor changes".

"He (Falih) has talked to several countries including Norway, including Turkmenistan, including Egypt, and they have made signs of their willingness to join the collaboration," Reuters cited al-Marzouq as saying.

Earlier, OPEC Secretary-General Mohammed Barkindo said that other countries, including Egypt, may join the oil production limiting agreement.

A senior analyst of 'Uralsib Capital', Alexei Kokin, speaking to Vestnik Kavkaza, noted that the most important is the news of Norway joining the OPEC deal. "Norway's oil dynamics are quite good, it produces about 2 million barrels per day. Its accession to oil production cuts will affect the overall efficiency of the deal - the question is only how much it will reduce output," he pointed out, adding that the participation of the other two countries is of importance only in the political sense, as Egypt's current production is about 0.5 million barrels per day, and Turkmenistan's - about 0.25 million barrels per day.

At the same time, Alexei Kokin stressed that it would be difficult to achieve a balance of supply and demand in the oil market, despite the accession of new participants to the OPEC deal. "There will be no balance until the US and Canada participate in the agreement - but their participation is virtually impossible. There is also China, which produces more than 4 million barrels per day, but the fact is that the Chinese oil production is already falling by 7-8 % per year. And the US and Canada will never limit production - it is illegal there and may be subject to antitrust investigation," the expert said.

The accession of new countries to the OPEC deal shows its effectiveness. "People saw that the more participants join the deal, the more it succeeds in gaining confidence in the markets," Alexei Kokin suggested.

Sberbank CIB analyst Valery Nesterov, in turn, also singled out Norway's decision to join the deal. "Norway's production has been on the rise in recent months, and it's surprising that it also decided to join the agreement to cut oil production. The OPEC deal will have a positive impact on oil prices in any case, so their decision can be viewed as a PR move," he drew attention.

Such a petroleum policy hides a sober calculation. "Even if Norway, Egypt or Turkmenistan reduce their production, the effect of higher oil prices will more than cover all the expected costs of declining production. For example, Turkmenistan's neighbors, Azerbaijan and Kazakhstan, have already joined the deal, and nobody remembers Turkmen oil. Norway cannot afford to stand alone either. Egypt is an Arab country that feels the need to show solidarity with its brothers in the region," Valery Nesterov noted.

In his estimation, Brazil could also join the OPEC deal. "It may be worthwhile not to increase the number of participants, but to consider increasing the quotas for reducing oil output. It would allow to increase prices even higher. It is also important to extend the deal not to March, but to the middle or even the end of 2018, as after the termination of the agreement, prices may decline again," Sberbank CIB analyst concluded.


Vestnik Kavkaza

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