A cut in the production of Petroleum seems more likely, but its effects on the market are likely to be reduced. To say it is the monthly report on oil by Goldman Sachs, according to which the declarations of Saudi Arabia and Russia, in fact, seem to lead in this direction, despite the growing production of Libya, Nigeria and Iraq that seems to reduce the chances of success of such an agreement, leading to a rebalancing of the oil market in 2017.
The rally in oil prices following the extraordinary meeting of theOPEC of September 28 in Algiers continued, fueled by Russian and Saudi comments on a possible agreement to cut production by between 32,5 and 33 million barrels per day, as decided during the Algerian meeting.
An agreement that Saudi Arabia seems to have the authority to complete in the meeting scheduled for November 30 in Vienna. But, as usual, the risks of a disagreement are not to be underestimated, with Iraq currently the most vocal opponent, with its declared goal of increasing production next year.
In Goldman Sachs' view, a bust in the deal would push prices much lower, in the zone 43 dollars a barrel, also in light of the oil market surplus expected in the fourth quarter. Even if an agreement to cut production is reached, the chances of having a significant impact on the market and on oil inventories seem low, above all in light of the fact that the countries that would be exempt from the agreement are currently producing 500 barrels in more than expected.
In addition, there is a real risk that the Saudis will find little complacency on the part of the minor forces inside OPEC, as well as having to guard against growing production outside the organisation. The cut required in Saudi production, therefore, seriously risks being too strong to improve market conditions.
If the agreement is reached and implemented rigidly, it is still possible that market responses will lead it off the rails, also given the stabilization of US shale production, and the possibility that demand growth will remain resilient. Even assuming an output cut happens and is actually successfully implemented, an initial recovery in prices could gradually fade, Goldman said.
A vision, that of Goldman Sachs, which is also echoed by theAie (International Energy Agency), according to which "Despite timid signs that inventories are starting to decrease, our supply and demand forecast shows that the market would remain in surplus during the first half of next year" underlines Aie in monthly oil report”.
The IEA, however, is more positive on the possible effects of the OPEC production cut: "If it materialises, the rebalancing of the market could intervene more quickly". In September, the 14-country cartel pumped a record 33,64 million bpd, 160 bpd more than in August, and a year-over-year surplus of 910 bpd.
Within the Exporters Organization, the Iraq's production tops out at 4,46 million barrels per day, while that Iranian oil stood at 3,67 million barrels "slightly above the average level of 2011, before the start of international sanctions". Outside of Opec, on the other hand, lin Russia it fully opened the taps in September and increased by almost 0,5 million barrels per day to bring the production of non-cartel countries to 56,6 million barrels per day.
