When Opec and its non-member allies agreed combined production cuts of some 1.8mn b/d for six months from the beginning of this month to speed market rebalancing, there were going to be two keys to success in pushing prices higher — sentiment and reality.
Front-month Brent up by 4pc at $56.50/bl is Christmas come early for oil producing countries — for those that celebrate it at any rate.
And the seasonal gift is, arguably, undeserved. After all what did the collection of disparate producer countries come up with on 10 December in Vienna?
Are the odds on a pre-planned spontaneous walkout by the Saudi delegation in Vienna narrowing?
Some points to consider.
First, on 25 November an “Opec delegate” told Argus that this week’s meeting of ministers might fail to reach an output restraint deal. In subsequent days that message has been reinforced, with Saudi oil minister Khalid al-Falih telling reporters at the weekend that the market is rebalancing without Opec action and that Riyadh has other options.
Well, jet fuel demand is getting a boost from the upcoming Opec and Opec-non-Opec gatherings in Vienna. Venezuela’s president Nicolas Maduro and oil minister Eulogio Del Pino have taken to the skies to lobby anyone who will listen on the need for production restraint, although cynics likened the jaunts to the spouse who deals with a domestic dispute by taking the dog for a walk. Russia’s oil minister Alexander Novak was cosying up chez-Saud earlier this week, and Opec secretary-general Mohammed Barkindo spent this morning trying to get Baghdad’s buy-in to the Algiers proto-deal.
You would not want to be the organiser of a prestigious oil industry conference right now. Your speaker list is finalised, your delegates booked in, press applications scrutinised, and then the energy minister of one Opec member or another drops the bombshell that an informal meeting of producer countries will take place on the fringes of your event. Carefully crafted plenaries and break-out meetings with networking opportunities are scattered to the winds as the media circus hits town.