Oil CEOs are making a push to “stabilize” the market by calling on the Organization of the Petroleum Exporting Countries (OPEC) to extend out the March 2018 oil output cut deadline.
“OPEC members are reportedly forming a consensus around extending their production cutting deal with other crude exporters by nine months. That would prolong the agreement among OPEC, Russia and other oil-producing nations to keep 1.8 million barrels a day off the market through the whole of next year,” writes CNBC. “The exporters reached the deal last December and have already extended the agreement once through March of 2018.”
Total Chief Executive Patrick Pouyanne said that the agreement is needed to stabilize the “huge volatility in the market.”
“It is better to keep a stable policy and I think the OPEC and non-OPEC agreement is working efficiently and should continue,” said Pouyanne.
BP CEO Bob Dudley expressed similar sentiments.
“I heard what Patrick (Pouyanne) said about the volatility of oil and the factors here and I couldn’t agree with him more … I think this is the world we are living in,” said Dudley, who believes that the OPEC will extend the agreement.
Last week, Saudi Arabian Crown Prince Mohammed bin Salman, who just replace his cousin as the country’s leader earlier this year, also showed support for the extension of the agreement.
“We need to continue stabilizing the market,” said bin Salman.
Saudi Arabia is leading the pact renewal and the prince is especially invested since Saudi Aramco, the state-owned oil company in the Middle Eastern country is planning to IPO in 2018.
Russian President Vladimir Putin is also in support and said a few weeks ago that Riyadh and Moscow are committed to producing less oil in efforts to keep energy prices up.
“Everyone is benefiting,” said Bin Salman. “It’s the first time we have an OPEC and non-OPEC deal in stabilizing the oil market.”
The OPEC agreement has had the impact that the organization and oil companies had hoped for. Brent Oil closed on Monday at the highest it has been since 2017.
“The market has now held over $49/bbl for over a month, establishing that as the low end of the new range,” writes Drillinginfo.com
“The 24 oil-producing nations that participated in the cuts initially intended to reduce output for six months starting in January, but the supply glut that has weighed on prices since late 2014 has ebbed more slowly than expected. As a result, the group agreed to roll over the cuts in June for another nine months, until the end of March 2018,” writes Bloomberg. “While oil prices have risen, with international benchmark Brent near $60 a barrel as the physical market has improved, traders and analysts are still painting a cautious outlook for next year due to forecasts for rising output from the U.S., Brazil and Kazakhstan.”
Author’s note: These oil-rich companies think they are not making enough money and are using the OPEC to manipulate the market to keep the prices up. Bin Salman is wrong. Not everyone is benefiting from the pact. Consumers, for example, are paying more at the pumps for gas to subsidize for the lack of production. If all the oil companies that are part of the OPEC were in America, this would be called “price fixing” and they would be prosecuted under the anti-trust laws.