Sechin: everyone should join OPEC deal

 Sechin: everyone should join OPEC deal

Rosneft Chief Executive Officer Igor Sechin, speaking at the summit of the heads of energy companies within the framework of the St. Petersburg International Economic Forum, noted that the failure of all major oil-producing countries to join the deal between OPEC and non-cartel countries to cut oil production paves the way for new instability in the market.

"If the industry needs steady and long-term stability, all large producers should participate in the regulation of production, so in the current state, we cannot talk about stabilization or a steady break in negative market trends," the Rosneft CEO pointed out.

According to him,  the uncertainty in the market also leads to aggravation of the struggle for consumption markets. "Today, all the market participants are preparing for growth of production and struggle for the sales markets," Sechin warned.

The agreement between OPEC and non-OPEC countries gives the market a chance to breathe, but it is difficult to consider it systemic measures, the effect of which will lead to long-term stabilization. "A number of large producers that do not participate in these agreements, actively use the situation to strengthen their own market position, which creates conditions for a new instability," he said.

"Shale producers in the US have become large exporters with over 1.3 million barrels per day," RIA Novosti cited him as saying.

Rosneft CEO said that the achieved price of oil at $50 per barrel is useful for the Russian budget, but this state of the market is not sustainable. He also drew attention to the fact that the stability of Russian oil production was underestimated by the market.

A senior analyst of 'Uralsib Capital', Alexei Kokin, speaking to Vestnik Kavkaza, explained that Igor Sechin voiced a widespread pessimistic view that the output cuts by OPEC and non-OPEC countries only leads to a loss of market share by those who voluntarily reduce their output, first of all, at the expense of the US shale oil.

The expert drew attention to the fact that, in one way or another, there have been the stabilization of oil prices. "However, there are always uncertainties on the market, now it is primarily the issue of forecasting the production of US and Canadian oil for the current and next year," a senior analyst of 'Uralsib Capital' said.

According to him, time will tell whether real growth in production in the United States meets expectations. "Especially important are the figures for 2018, because now we have some breathing space, which is fraught with a concession of the market to other producers," the expert said.

That is why the effectiveness of the deal to limit the output is limited, according to some observers, he stressed. "However, there are those thinking that US shale mining simply is not able to grow so quickly next year," Alexei Kokin concluded.

The deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, in turn, said that even if the extension of the deal between OPEC and non-OPEC countries did not achieve the goal of complete balancing of supply and demand, in any case, it brought this point closer, preventing the price decline to $45.

According to the expert, the extension of the deal was a necessary step. "It is difficult to say now if this step turns out to be effective in terms of balancing the market, as it was initially clear that US producers will take advantage of the opportunity to increase their prices," he said.

"Another thing is that demand is also growing, so the imbalance is decreasing. It can be seen in the third quarter, which accounts for the main growth in demand during the year. As a result of the fourth quarter and the first quarter of next year, it is clear that there will be a reduction in the imbalance, which is favorable for prices," the deputy director of energy policy of the Institute of Energy and Finances expects.

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