Although the tone of some Organization for the Petroleum Exporting Countries (OPEC) earlier this year was that the global market was already rebalancing, two of the cartel's leading ministers now say in order for the rebalancing to work, non-members must contribute to the OPEC cutback scheme that was ratified last week.
Suhail Al Mazrouei, energy minister for the United Arab Emirates, thinks a global cut of 1.8 million barrels per day (bpd) will be enough to achieve rebalance, which is 600,000 barrels above what OPEC members signed on to cut last week.
Emmanuel Ibe Kachikwu, energy minister for Nigeria, told Bloomberg that OPEC only accounts for 40 % of total global production, and that the remaining 60 % «are not united as a body as we are, but we still need to take them along.»
He said that if all goes well, supply and demand should be balanced by middle to late 2017.
When asked if these initiatives may cause prices to rise high enough to prompt U.S. shale producers to come roaring full force back to the market, Kachikwu said nothing much will happen over the next 6 months, and that «we're just going to keep watching the envelope as we go.»
Mazrouei, who said «shale is always a worry,» went on to remark that if OPEC's scheme alone doesn't stop prices from falling further than they have, «we will meet again and we will discuss with non-OPEC and we will take the right measures» – but he did not elaborate on what those measures would be, nor does he think price declines - below $40, at least - are likely.
The duo stressed that Russia's participation which amounts to a trim of 300,000 bpd, is crucial to their success.
Chris Gersch, director of strategy for Bell Curve Capital, regards Russia's willingness to follow through – as well as the OPEC cutback deal in general – as not to be taken seriously.
He told Bloomberg, «OPEC makes these rules and they can't even enforce them; I mean, come on, all these traders know OPEC can't enforce these rules – and Russia cutting 300,000 barrels? That's a joke.
You think they're going to let the U.S. pick up all that production? I don't think so.»
Gersch was responding to Brent and West Texas Intermediate dropping 1.7 and 2.3 % on Wednesday due to a report showing that stockpiles at Cushing, Oklahoma rose by 3.78 million barrels last week.
Gersch would no doubt scoff at remarks made earlier this week by Pierre Andurand, chief investment officer and founder of Andurand Capital Management LP, who thinks oil will soon rise to $70 due to vastly improved fundamentals, and who also believes compliance involving the OPEC cutback deal as well as Russia's participation are sure bets.
