OPEC is hoping to finalize a long-term cooperation pact to help manage the global oil market with Russia and other key oil producer allies at their next meeting in December, the producer group’s secretary general, Mohammed Barkindo, said Wednesday.
S&P Global Platts OPEC, Russia, and nine other non-OPEC producers have for months been considering ways to institutionalize and make permanent their current alliance.
The agreement, which began in late 2016 with the signing of an accord to cut 1.8 million b/d of oil output, has been credited for lifting oil prices from a two-year slump.
Consultations of the draft charter are ongoing but the target is to sign the framework agreement in December, Barkindo said.
“Every country is submitting their input because it’s a multilateral process until we get all their input, then we’ll sit down and synthesize,” Barkindo told S&P Global Platts on the sidelines of an oil conference in Cape Town. “We want to be able to get that out [in December].”
OPEC’s next regular meeting is December 3, with non-OPEC partners scheduled to join the talks December 4.
A draft charter seen last week by Platts calls on ministers of the 24-country producer coalition to meet at least once a year to discuss output policy and review supply and demand fundamentals.
“I think the market has now accepted the declaration of cooperation as a permanent feature in the world oil market, therefore the industry will expect us to continue this partnership, continue in this role of trying to restore stability on a sustainable basis,” Barkindo told reporters in separate comments.
Pressure from US President Donald Trump to moderate oil prices, along with fears of an overtightening market ahead, with the US set to reimpose oil sanctions on Iran in November, prompted the OPEC/non-OPEC coalition to agree June 23 on a 1 million bpd output increase.
The secretary-general said that the oil market has “responded positively” to the decision, which committed the producers to ease over-compliance with their output cuts, with OECD commercial oil stocks now below the targeted five-year average.
“In June we found we overshot the target so we reversed course,” Barkindo said.
‘No Disagreement in OPEC’
OPEC produced 32.68 million bpd in July, according to the latest Platts OPEC survey of industry officials, analysts and tanker tracking data.
That is a 360,000 bpd increase over June output, when the Republic of Congo, which joined OPEC that month, is not included.
But divisions within OPEC have emerged, with Iran insisting that the agreement still binds countries to their individual quotas, while Saudi Arabia and its Gulf allies have said that the quotas no longer apply. Rather, a collective production ceiling is now the deal, they say.
The differences in interpretations have led to a sharp war of words between geopolitical foes Iran and Saudi Arabia, with Iranian officials threatening to cut off oil exports by its neighbors if they infringe on Tehran’s market share.
Barkindo, however, dismissed suggestions that OPEC unity was in tatters.
“In June, all the conference did was to urge the countries to strive to return to 100%, [which] would require additional supplies to the market,” he said. “There is no disagreement either within OPEC or between OPEC and non-OPEC on that decision.”
On the demand side, he said that, while the current trade dispute between the US and its key trading partners such as China could hit global oil demand, OPEC is confident that the disputes will be resolved. OPEC analysts have estimated that an escalating tariff tit-for-tat could impact up to 350,000 bpd of oil demand in a worst-case scenario.
“The trade disputes that are emerging among some of the leading partners in the world will eventually begin to hurt growth and, by extension, demand for energy,” Barkindo said.
“But we are confident that, through the discussions going on, these parties will be able to overcome some of these challenges. We are hopeful that we will be able to overcome this cloud of uncertainty regarding trade as quickly as we can.”