Opec again sought to reassure markets after one of its biggest customers complained about the pain of high prices.
“There is no cause for alarm,” Opec secretary-general Mohammad Barkindo said yesterday, adding that India had sent a letter bemoaning the state of the oil market. While insisting supplies are sufficient, he neglected to specify how much extra production Opec intends – or is able – to pump, an omission that’s undermining its effort to calm prices.
Opec nations and its allies with spare capacity have given their assurance that “they are ready and willing to continue to make sure that the market remains well supplied,” Barkindo said at the Oil & Money conference in London. The group is keen to assuage any fears among its customers, and will hold talks with India on October 17, he said.
Crude surged to a four-year high earlier this month on concern US sanctions on Iran, along with chronic supply losses in Venezuela, could lead to a shortage. Emerging economies, most notably India, are bearing the brunt of the rally, which comes when they’re already contending with currency depreciation and the fallout from trade disputes.
Saudi Arabia, the Organization of Petroleum Exporting Countries’ top producer, and ally Russia have signalled they’re doing their bit to mitigate losses – pumping an extra 1mn bpd following their June deal to boost production. But traders are worried the Saudis aren’t acting quickly enough – or may lack the capacity – to fill a shortfall.
The market balance may be “fragile” but that’s not a result of fundamentals, Barkindo said. Opec sees a possible rebuild of oil stockpiles next year, he said, conceding that it remains “very concerned” about the level of spare production capacity following years of under-investment.
The oil-market balance is continually being tested, but prices have reacted to perceptions of scant supply, not real shortages, he said.
The 25 countries in the coalition of Opec and non-members – known as Opec+ – are still working on turning their ad-hoc alliance into something more permanent. Opec representatives, known as governors, will discuss the framework when they meet on October 23 in Vienna, while officials from non-Opec will visit the Austrian capital for follow-up talks on November 7. The coalition aims to have a more detailed plan by the time ministers meet in December.
“We are now gradually but steadily seeing the brighter path ahead,” Barkindo said. That’s “despite some of the bumps, despite some of the occasional clouds that have gathered.”
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