Disputes among OPEC members over the implementation of crude oil production cuts as a follow-up to the agreement agreed in Algeria last month hampered cooperation with other producers. As a result, oil prices are increasingly vulnerable to falling. At the close of trading Friday (Oct 28) the price of the West Texas Intermediate, (WTI) December 2016 contract fell 1.02 points or 2.05% to US$ 48.7 per barrel.
The price of the Brent oil contract in December 2016 fell 0.76 points or 1.51% to US$ 49.71 per barrel. Brazil's Oil and Gas Minister Marcio Felix said oil-producing countries, both OPEC and non-OPEC, ended talks at yesterday's meeting without any commitments. The reason is, the results of the process of limiting production depend on the steps of Iran and Iraq. Iran and Iraq want to be exempt from production cuts because they both need funds due to militant attacks.
Previously, other member countries such as Libya and Nigeria would not participate in production restrictions due to their oil industry which had been disrupted since the beginning of the year. Non-OPEC countries such as Oman have stated that they are not willing to cooperate in cutting production until OPEC has an internal agreement of its own.
An optimistic view was expressed by Deputy Energy Minister of Kazakhstan, Magzum Mirzagaliyev, who believed that Saturday's meeting (Oct 29) was the first successful step for dialogue between OPEC and non-OPEC.
The meeting also indicated how many countries are ready to contribute to the OPEC meeting on November 30. Russia also insists they are only willing to freeze production, not cut it. This is done on the condition that OPEC has reached an internal agreement. The largest non-OPEC producer produces crude at around 11.1 million barrels per day. OPEC Secretary-General Mohammed Barkindo warned of consequences if producers did not follow through on the agreement in Algeria.
The price of WTI is hovering around the level of US$50 per barrel as the market is still waiting for OPEC's stance in the meeting held on November 30. Earlier at the September Z8 meeting in Algeria, OPEC agreed to cut output by around 700,000 barrels to 32.5-33 million barrels per day. World Energy data shows that last Saturday's meeting involving Azerbaijan, Brazil, Kazakhstan, Mexico, Oman, and Russia produced around 19.6 million barrels per day or about 21 percent.
This figure is half the production of 14 OPEC member countries. Standard Chartered in its research publication, explained that the right moment to establish cooperation in stabilizing the oil market was at the OPEC meeting on November 30, 2016. Outside OPEC, Russian President Vladimir Putin said he supports OPEC and is ready to participate in cutting production. Rumors emerged that Putin wanted a freeze rather than a production cut.
Libya and Nigeria plan to boost production after their mining industry activities were disrupted by terrorist attacks. Libya is estimated to be able to produce 560,000 barrels per day or 200,000 barrels higher than the production in September 2016. The political environment that is still unstable still allows the production process to experience obstacles again.
In Nigeria, production levels can be boosted up to 1.8 million barrels per day. As of September 2016, crude oil yields were 1.4 million barrels per day. Bob Yawger, director of the Futures Division of Mizuho Securities USA Inc., said OPEC's move was a wishy-washy move to cut production.
Bisnis Indonesia, Page-16, Monday, Oct 31, 2016