Russia holds key to extension of Opec, non-Opec deal
OREANDA-NEWS. All Opec members support extending until the end of 2018 an agreement with non-Opec producers to cut just over 1.7mn b/d from the market, an Opec Gulf delegate told today.
"The problem is Russia," which may not be able to agree a nine-month extension for domestic reasons, he said.
Although Russian president Vladimir Putin had indicated he was open to co-operating with Opec to extend the deal as necessary, there is "an internal debate" between the Russian oil ministry on the one hand, and Russian oil companies and the Russian ministry of commerce (MOC) on the other, said the delegate.
The companies and the MOC want crude prices to remain below $65/bl until the end of 2018. The former are worried that prices above that level would increase their tax liabilities. The MOC is concerned a higher crude price would cause the rouble to appreciate, making Russian exports less attractive.
The emerging Russian position is an acceptance of a six-month extension to the deal, although Moscow could agree to a nine-month extension provided the decision is drafted in language that allows for a revision before the end of 2018. Clarity is likely once oil minister Alexander Novak arrives and meets with his Saudi counterpart Khalid al-Falih and other Opec ministers. Novak is scheduled to arrive in Vienna later today.
Mideast Gulf Opec ministers were strategising earlier today, with UAE oil minister Suhail al-Mazrouei and Kuwaiti oil minister Issam al-Marzouq in meetings with al-Falih at his hotel. Opec ministers will meet tomorrow morning at Opec headquarters, and will then meet with non-Opec producers, led by Russia, to finalise an agreement.
Gulf Cooperation Council (GCC) members of Opec usually meet ahead of Opec meetings to co-ordinate, but a diplomatic row that has isolated Qatar means Qatari oil minister Mohammed al-Sada will not be part of such a meeting. Kuwait, which tried to mediate an end to the row earlier this year, is likely to co-ordinate with Qatar to ensure it is on board.