Russia and Saudi Arabia believes that the oil output cut deal would be extended unless the market became balanced, Russian Energy Minister Alexander Novak said.
The energy ministers of OPEC and non-OPEC countries agree that the decision on the future of the oil output cut deal should be made closer to its completion.
"In principle we have such an option, and there are such opportunities regarding the extension, but it is expedient to make a decision closer to the completion of the deal in order to understand the forecasts and the market condition more clearly," Sputnik cited Novak as saying.
Novak said that the positions of Russia and Saudi Arabia on the deal were similar: the agreement would be extended unless the market became balanced.
Novak told the Rossiya 24 television channel that a meeting of the Russia-Saudi Arabia intergovernmental commission will take place in Riyadh on November 2.
The Organization of the Petroleum Exporting Countries in November 2016 agreed in Vienna to reduce its production by 1.2 million barrels per day from the October 2016 level. Eleven non-OPEC countries in December 2016 agreed to cut their production by a total of 558,000 barrels per day, including Russia by 300,000 bpd. The agreement was concluded for the first half of 2017. In May 2017 it was extended by nine months — until the end of March 2018.
The director of the Center for Studies of World Energy Markets at the RAS Institute of Energy Research, Vyacheslav Kulagin, speaking with a correspondent of Vestnik Kavkaza, said that there is no single indicator that could serve as a clear indicator that the market has reached a balance. "There are a number of indirect indicators that point to this. That is, there is a whole layer of statistical and analytical information that allows us to conclude how close we are to balance," he said.
"Based on this information, our ministers can come to some joint conclusion - whether the market is balanced or whether it is far from it. Of course, when taking decisions to refuse the deal, Moscow and Riyadh will have to conciser the market situation in the next year or a year and a half, and the situation in the US market. It is clear that the state of the economies of the countries and the demand for oil will be monitored as well. The most approximate indicator for the market balance is supply and demand monitoring," Vyacheslav Kulagin stressed.
The market is able to reach balance in the near future. "In normal conditions, any market always strives for self-balancing. The balance is realistic,the question is at what price level it may happen. Even five years ago, most of the production of unconventional oil at a level of even $70 per barrel was unprofitable, but now this margin has significantly declined due to development of technology," the economist drew attention.
According to the director of the Center for Studies of World Energy Markets at the RAS Institute of Energy Research, countries can relatively easily exit the deal with OPEC, without collapsing oil prices. "If the deal was not extended, it is necessary to agree on a gradual increase in production with an eye to the market balance, so that the increase in output does not lead to a natural rapid imbalance and a pull back of prices. They need to coordinate their actions. Very often, without concluding any deals, Saudi Arabia kept a significant part of the reserves to prevent unpleasant consequences in the market," Vyacheslav Kulagin recalled.
