OPEC Focuses On Exports As Compliance Slips Further

Key protagonists from the joint Opec/non-Opec production agreement descended on Moscow for this week’s Russia Energy Week. Despite growing signs that the market is inching into balance, it looks increasingly likely that production curbs will be extended beyond its current March 2018 expiry.

The initial deal struck in November 2016 was for these restrictions to be in place for six months from January, but they are now likely to be extended into the second half of 2018 at least.

While the shift towards balance is much slower than Opec had hoped, the outlook has improved in recent weeks.

Brent averaged above $55/B in September, the first time it has achieved this since February. It peaked at $59.02/B on 25 September, the highest since July 2015 and was trading at around $57/B as MEES went to press.

Moreover, Brent has now swung into backwardation, with futures prices below front-end prices. This ought to discourage stockpiling and facilitate the unwinding of inventories. Opec Secretary General Mohammad Barkindo estimated on 25 September that OECD crude inventories had fallen to 170mn barrels above the five-year average, down from 340mn above in January.



By upgrading your Print or Digital subscription you will gain access to the MEES Archives Database with past articles and data dating back from 1984.