Derrick Digest for Dec. 16, 2016: Moscow earns kudos for mediating landmark OPEC deal
The Derrick Digest is a weekly collection of curated content, based on events from across the oil and gas industry, that caught our eye at Pennine Petroleum Corporation. Enjoy and share!
Dec. 16, 2016
OPEC countries finally got the engine firing on an historic oil deal.
But make no mistake—it was Russia doing the driving.
Moscow’s successful mediation of a landmark Organization of Petroleum Exporting Countries (OPEC) agreement to curb oil production has been praised by officials from both Saudi Arabia and Iran, which have traditionally been at odds with each other within OPEC.
“I think that Russia’s role was, and is, very important,” Ghadir Ghiafeh, vice chairman of the Iran-Russia Chamber of Commerce, told the RT.com news service.
Russian President Vladimir Putin’s assumption of a mediator’s role in talks with Iran demonstrated “efforts to build new cooperation between OPEC and non-OPEC members,” adds Ghiafeh, adding that OPEC members previously “had not been able to reach (an agreement) for over a year.”
Under the terms of this historic agreement, reached Dec. 10 in Vienna:
OPEC members will slash their oil production by 1.2 million barrels per day; and
Twelve non-OPEC members, including Russia, will cut their production by 558,000 bpd.
The Dec. 10 meeting “gave us understanding that we are all in the same boat, we all benefit (from being) together while (our attempts) to take advantage of each other” eventually damaged the market,” said Saudi energy minister Khalid Al-Falih.
Global oil glut expected to drain away
On paper, OPEC’s landmark supply agreement could cut the world’s oil glut in half by mid-2017, says the Bloomberg news service.
If the signatories remain firm to their promise, record inventories that have been built up since late 2014 would drain away at a rate of about 760,000 bpd, according to Bloomberg calculations that use data from the International Energy Agency.
Through the six-month span of the deal, about 46 percent of the world’s 300-million-barrel stockpile would disappear.
“I do believe the market will balance in late 2017, if OPEC adheres to the production quota that they set out. I have very little confidence in OPEC, longer-term,” Fadel Gheit, a senior energy strategist with Oppenheimer, told Bloomberg TV. “In the first few months, I would say compliance will be probably 90 percent. But after that, I think it will start to deteriorate.”
Some believe that crude prices could reach US$70 per barrel by June 2017.
Canadian oil proponents tapped by Trump
Suddenly, the Canadian oil industry has friends in very high places.
U.S. president-elect Donald Trump announced Tuesday that he’s tapping Rex Tillerson, chairman and CEO of ExxonMobil, as the next U.S. secretary of state. Sources have also told The Associated Press that former Texas governor Rick Perry will be Trump’s pick as energy secretary.
Both of these prospective Trump cabinet members have advocated, in the past, for the Keystone XL pipeline.
Tillerson had also mentioned to Gary Doer, Canada’s former ambassador to Washington, the various projects ExxonMobil hoped to advance in Canada, including one in Alberta with a potential of 4.6 billion barrels of crude and an investment in lower-emitting extraction technology.
“He was very proud of those investments,” Doer told The Canadian Press.