Several states including UAE expressed optimism towards reaching an agreement regarding extending oil cut during Thursday’s oil markets' meeting, according to statements made by UAE Minister for Energy Suhail al-Mazroui to Bloomberg on Sunday.
The Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) will hold its last meeting for this year on Wednesday, one day before the decisive meeting of oil markets on Thursday. However, it is almost certain that the oil cut deal will be extended but the duration remains vague.
Mazroui said that he expects 2018 to be the year of re-balance in the oil market, and for this to happen the oil reserves in industrial states should drop to five-year level.
On Monday, OPEC Secretary-General Mohammad Barkindo stated that reserves dropped around 240 million barrels since the beginning of the oil cut deal, in his speech during a workshop for OPEC and non-OPEC states. “Our will and hard work are yielding,” he added.
Barclays on Monday said that while it expects a six- or nine-month extension during a meeting on Nov. 30, the level of production cuts would be more significant than the duration. The bank forecast Brent to remain above $60 per barrel in the fourth quarter of 2017, and fall to $55 in 2018. It stood at around $63.80 on Monday.
“We believe the level of the cut is what really matters, and we assign a low likelihood to this detail being announced on November 30. If the meeting concludes as the market expects, prices could experience a short-term selloff, but the technicals and fundamentals will likely remain constructive,” the bank said.
“The sustainability of the deal depends on how much longer Saudi Arabia, Russia, Iran and Kuwait are willing to sacrifice market share in the pursuit of revenue and market stability,” analysts at the bank said in a note.
The deal to cut output expires in March 2018, but OPEC will meet on Nov. 30 to discuss its policy.