Russia, OPEC reach consensus on outline to extend oil curbs

Bloomberg

OPEC and Russia have crafted the outline of a deal to extend their oil production cuts to the end of next year, although both sides are still hammering out crucial details, according to people involved in the conversations.
The Organisation of Petroleum Exporting Countries and several non-OPEC nations led by Russia will meet next week in Vienna
to discuss prolonging their output curbs. Moscow had been
hesitating over the need for an extension now because the current deal doesn’t expire until
the end of March.
After days of talks, Moscow and Riyadh now agree they should announce an additional period of cuts at the November 30 meeting, the people said, asking not to be named because the conversations are private.
Russia wants the extension deal to include new language that would link the size of
the curbs to the health of the oil market, they said.
“The goal to re-balance the market hasn’t been met in full yet, so everyone is in favor of
extensions to reach final goals, Russia also supports these proposals,” Energy Minister Alexander Novak said in an interview with RBC television. “Different options are considered now,
we will discuss details at the
November 30 meeting.”
Russian President Vladimir Putin talked on the phone with Saudi King Salman bin Abdulaziz on November 21, during which they “emphasized importance of further coordination between Russia and Saudi Arabia in the global hydrocarbon markets,” according to a Kremlin statement.
The deal isn’t finalized as Russia and Saudi Arabia haven’t yet agreed on the new language, the people said. Oil ministers are due to start arriving in Vienna for
the talks early next week. West Texas Intermediate crude, the US benchmark, extended gains to the highest level since July 2015. Futures for January delivery rose as much as 1.6 percent to $58.92 a barrel in New York.
OPEC and non-OPEC countries are discussing several formulas to accommodate the Russian demands, including linking the cuts to the supply-demand balance on the global oil market, or the level of fuel inventories in industrialized countries, the people said. Another option is making a clear reference to the fact that the deal could be reviewed again early next year, including the possibility of calling another meeting.
Whatever OPEC and Russia agree, the countries will have an opportunity to review their deal again in mid-2018, as OPEC will probably hold a regular ministerial gathering then. OPEC is organising its international seminar in Vienna on June 20 to 21. That conference assembles a who’s who of the oil world and traditionally coincides with a ministerial meeting.
Oil briefly surpassed $59 a barrel in New York for the first time in two years as OPEC and Russia were said to have crafted the outline of a deal to extend their oil production cuts.
Futures closed 1.6 percent higher, just 10 cents below a fresh two-year high. “Russia has been scared of higher prices and has been sort of unwilling to commit to a nine month” extension of cuts, Sam Alderson, analyst at Energy Aspects Ltd., said in a phone interview from London. Oil market strength comes from “the more positive signs from Russia.”
The US benchmark this week has traded at levels last reached in mid-2015 on heightened optimism that the Organization of Petroleum Exporting Countries and its allies will agree to prolong cuts until the end of next year. Prices are up more than 8 percent in November, heading for a third monthly gain in what would be the longest winning streak since May last year.
Prices have also been supported by the shutdown of the TransCanada Corp. Keystone pipeline that supplies as much as 590,000 barrels a day of Canadian crude to the US. The shutdown entered its second week on Friday after a November 16 leak spilled 5,000 barrels in South Dakota.
The line carries Canadian crude to Cushing, Oklahoma, the main pipeline and storage-tank hub in the US.