Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • S&P 500

    5,250.17
    +1.68 (+0.03%)
     
  • Dow

    39,748.98
    -11.10 (-0.03%)
     
  • Nasdaq

    16,388.83
    -10.69 (-0.07%)
     
  • Bitcoin USD

    70,955.17
    +1,534.12 (+2.21%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,962.93
    +30.95 (+0.39%)
     
  • Gold

    2,227.10
    +14.40 (+0.65%)
     
  • Crude Oil

    82.27
    +0.92 (+1.13%)
     
  • 10-Yr Bond

    4.1980
    +0.0020 (+0.05%)
     
  • Nikkei

    40,168.07
    -594.66 (-1.46%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE Bursa Malaysia

    1,530.60
    -7.82 (-0.51%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

Opec and Russian to hold firm on oil production

Saudi Arabia's energy minister Khalid Al-Falih - EPA
Saudi Arabia's energy minister Khalid Al-Falih - EPA

A historic oil deal between Opec and Russia has been strengthened by a renewed commitment to restrict crude supplies throughout 2018 – and a new pledge to continue collaborating into 2019.

Following a meeting in Oman yesterday, Saudi Arabia and Russia said there was “unwavering resolve” to limit oil production and that their ­alliance could continue beyond this year. They insisted that despite a sharp rise in US shale production they will ­succeed in their effort to erode the glut of crude that has weighed on market prices.

The show of unity contrasts with ­recent wariness from Russia. Its stance late last year threatened to ­splinter support for extending the oil production cuts until the end of 2018.

ADVERTISEMENT

It comes days after the International Energy Agency warned that an “explosive” expansion in the US shale heartlands could reduce the impact of Opec-led supply cuts. Ahead of the weekend meeting, Russian energy minister Alexander Novak was ­expected to push for a gradual exit from the pact next year in order to take full advantage of the country’s enormous oil reserves as market prices ­begin to rise.

Instead of agreeing an exit strategy, however, Opec and Russia ­yesterday said they would maintain close ties to monitor the market’s ­recovery as it emerges from one of its deepest ever oil price routs through next year too.

Russian oil bosses have reportedly warned Mr Novak to leave the deal if prices remain above the $70 mark. But the minister said the recent surge in oil prices is likely to be temporary and vowed to stand alongside Saudi Arabia in sticking to the quotas until the oil market moves back into balance this year.

Alexander Novak, Russia's energy minister - Credit: Andrey Rudakov
Alexander Novak, Russia's energy minister Credit: Andrey Rudakov

Saudi Arabia’s Khalid al-Falih told ­reporters in Oman that the group is ready to discuss a longer framework for co-operation, but no ­detailed ­decisions have been made. “The mechanism hasn’t been determined yet, but there is a consensus to continue,” Falih told reporters after the meeting.

“When we started this journey more than a year ago, we faced severe challenges in transforming market sentiment from deeply negative to positive, and restoring confidence in our ability to bring stability to the market. At the time, concerns were expressed that similar frameworks had unravelled in the past,” he said.

Instead, the group had managed a compliance rate of over 100pc with their targets, which had helped to cut excess oil supplies from 340 million barrels of oil to fewer than a 120 million barrels.

“We as major producers have held together despite numerous challenges,” Mr Al Falih said.

Since the 12-year oil price lows in 2016, Opec has increased its diplomatic ties with Russia and other major suppliers outside of its cartel to strengthen its influence as shale production from the US threatens to usurp Saudi Arabia’s position as the dominant “swing producer”.

Opec has also sought to build better relationships with major oil consumers in China and India to help manage the market through clearer ­demand forecasts.