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OPEC's Barkindo admits 'extraordinary measures' needed to sustain oil rebalancing

London (Platts)--10 Oct 2017 923 am EDT/1323 GMT


OPEC has signalled to the market that it could further broaden its OPEC/non-OPEC alliance, ramping up the rhetoric over the possibility of expanding its membership and trying to deepen its dialogue with US shale in order to rebalance the market.


  • Urges US shale producers to share 'collective responsibility'
  • Massive destocking underway in oil market

Speaking at the India Energy Forum in New Delhi, OPEC's secretary general Mohammed Barkindo admitted that OPEC and non-OPEC producers will require "some extraordinary measures" to sustain the rebalancing of the oil markets.

"Emerging from this most vicious of all oil cycles, the need to sustain the rebalanced market in the medium to long term, some extraordinary measures could be considered by countries participating in [the current deal]... including expanding the membership," said Barkindo.

In his speech, Barkindo also indicated that besides the 24 countries participating in the accord, other producers needed to be included.

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He specifically mentioned US shale oil producers, whose oil production has grown this year.

"We urge our friends in the shale basins of North America to take this shared responsibility with all the seriousness it deserves, as one of the key lessons learnt from the current, unique supply-driven cycle," he said.

In mid-July, Barkindo said OPEC planned to hold additional consultations later this year with US shale producers on the state of the market, as it deems it necessary to combine the efforts of all major contributors to the current crude supply crunch.

OPEC reached out to US shale oil producers earlier this year during CERA Week in Houston, where the sides came together to exchange information for the first time.

OPEC and 10 non-OPEC countries agreed to jointly cut crude production by 1.8 million b/d to help stabilize global oil markets and oil prices, in an effort some experts say may be derailed by surging US shale production.

The deal, which started January 1 for an initial six months, has since been extended until end-March 2018.


POSITIVE FUNDAMENTALS


Barkindo admitted there were some positive fundamentals as a result of the deal, as evidenced by the "very massive de-stocking" taking place.

"The market structure has switched to backwardation, making it uneconomical to continue to keep storage," he said. "We are satisfied with the pace and level of the rebalancing process."

The secretary general also forecast demand to grow at 1.5 million b/d this year and around 1.4 million b/d in 2018.

At the same time, OPEC is closing in on its target of bringing stock levels back down to their five-year average.

Crude oil inventories have dropped to around 171 billion barrels, Barkindo said, since OPEC and non-OPEC producers agreed to cut back production from the beginning of January.

They had previously been more than 340 million barrels over the five-year global average.

The agreement calls on OPEC and 10 non-OPEC producers, led by Russia, to cut a combined 1.8 million b/d in supplies through March to hasten the market's rebalancing. The full OPEC/non-OPEC coalition next meets November 30 in Vienna.

--Ratnajyoti Dutta, newsdesk@spglobal.com
--Adal Mirza, adal.mirza@spglobal.com
--Eklavya Gupte, eklavya.gupte@spglobal.com
--Edited by Jonathan Fox, jonathan.fox@spglobal.com

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