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The world waits on Opec

Global economic health is at stake as energy leaders await freeze deal confirmation

Opec must formalise a provisional agreement to freeze oil output, reduce oil-price volatility and boost the global economy, crude producers told delegates at the World Energy Congress on Tuesday.

"This is not a question of the economies of oil producers, it's a question of the economy of the world," Venezuela's oil minister Eulogio Del Pino said. "The world economy is waiting for a decision to be taken by the world's oil producers."

Last month Opec provisionally agreed in Algiers to maintain oil production between 32.5m barrels a day and 33m b/d. The group is due to continue discussions at its next official meeting in Vienna in November.

Data released today by the International Energy Agency (IEA) show global oil supply increased by 0.6m b/d in September, as Opec output reached an all-time high of 33.64m b/d.

This is a rise of 160,000 b/d from August levels as Iraq pumped at its highest ever rate and Libya reopened oil ports. This helped to push the group's total out-put 0.9m b/d higher than a year earlier.

Non-Opec production also increased by nearly 0.5m b/d, due to higher Russian and Kazakh flows.

No Opec member has been hit harder from the oil price crash than Venezuela. The country's oil-dependent economy was already in perilous shape with crude prices at close to $100-a-barrel thanks to years of wasteful mismanagement of tens of billions of petrodollars. When crude prices crashed below $30/b at the beginning of this year, the country's finances went into meltdown and its output crashed. By June crude production from the country with the largest oil reserves in the world had tumbled to 2.18m b/d-a fall of 300,000 b/d from two years earlier. The IEA reported Venezuela's oil output had slipped 10,000 b/d lower in September, down to 2.13m b/d.

"The stress on everybody's balance sheets has been huge and we're just not investing enough," said Patrick Pouyanné, chief executive of Total. "It's difficult to express to people on the street but if we don't invest, production will decline by around 5% per year, which is huge. There is huge oil-price volatility and not enough investment."

Alexander Novak, Russian energy minister, said improved technology has helped to shorten investment cycles, but oil-price volatility has increased significantly, partly because of an Opec-wide strategy to pump at will since the end of 2014.

Novak added that although the market should ordinarily be left to bring supply and demand back into balance, it was now time for a collective output freeze both within and outside of Opec.

"Freezing of [oil] production is the best way to rebalance the markets so we can all decrease the price volatility," Novak said. 'It will help bring investment into the industry and it will influence the social and economic development of different countries. That's why we're prepared to join this freeze process."

Russia's liquids output has borne the pain of the oil-price crash better than many crude producing nations, withstanding lower prices, international sanctions and the devaluation of the ruble to become non-Opec's largest source of supply growth this year.

In September Russian crude and condensate production surged to a post-Soviet high in September, the IEA said, averaging 11.11m b/d.

The agency said that all major oil companies operating in Russia pushed output higher but the biggest month-on-month gain was from the ExxonMobil operated Sakhalin 1 project, which was shut for maintenance in August.

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