Debate On Nigeria, Libya

DEBATE ON NIGERIA, LIBYA

Novak told reporters after meeting Falih: “We understand that we need to take further steps to rebalance the market ... We have a common understanding (with Falih).”

Amrita Sen from consultancy Energy Aspects said she believed the debate between Saudi Arabia and Russia was about timings rather than substance.

“Saudi Arabia believes it is too early to discuss an exit strategy as the market rebalancing job hasn’t been done yet. Russia would like to do it sooner ... OPEC has surprised on the upside during its past three meetings and delivered more than the market had expected,” she said.

The production cuts have been in place since the start of 2017 and helped halve an excess of global oil stocks although those remain at 140 million barrels above the five-year average, according to OPEC.Two sources familiar with OPEC talks said the group may debate capping Nigerian and Libyan output at 1.8 million bpd and 1 million bpd respectively, having exempted the two countries so far due to unrest and lower-than-normal production volumes.

Russia has signaled it wants to understand better how producers will exit from the cuts as it needs to provide guidance to its private and state energy companies.

“It is important ... to work out a strategy which we will follow from April 2018,” Novak told the monitoring committee.

Iraqi Oil Minister Jabar al-Luaibi said there had been little discussion so far on any exit strategy.

Some Russian producers including Rosneft, run by an ally of President Vladimir Putin, Igor Sechin, have questioned the rationale of prolonging the cuts, saying it will lead to a loss of market share to U.S. firms, which are not reducing output.

OPEC, which comprises 14 countries, has traditionally been much less worried about exit strategies as its members have been known for reducing compliance and cheating on their quotas toward the expiry of such deals.

“Russia seems to be pushing OPEC to have a concrete plan to phase out the cuts when appropriate ... compared to the typical undisciplined OPEC strategy,” U.S. bank Tudor, Pickering, Holt & Co, which is active in the shale industry, said.