Don't Rule Out OPEC Cut, Say Top Oil Traders

Don't Rule Out OPEC Cut, Say Top Oil Traders
Forget conspiracy theories and be prepared for OPEC to cut output in November because this is what they need to do and have done in the past, veteran oil traders say.


LONDON, Nov 4 (Reuters) - Forget conspiracy theories and be prepared for OPEC to cut output in November because this is what they need to do and have done in the past, veteran oil traders who run and co-own some of the world's biggest trading firms told the Reuters Commodities Summit.

The views from the top executives of Vitol, Gunvor and Mercuria go against expectations that the 12-member Organization of the Petroleum Exporting Countries is unlikely to step in and support prices.

Oil prices have fallen sharply from $115 a barrel in June to a four-year low near $82 on Tuesday on weakening demand, ample supply and the perception that OPEC heavyweight Saudi Arabia is happy to keep prices at levels of $70-$80 per barrel.

OPEC members Kuwait and Iran have also said a cut in production at the Nov. 27 OPEC meeting was unlikely. Saudi Arabia has yet to comment publicly.

"My feeling is we're underestimating now the possibility of OPEC cutting," Vitol's chief Ian Taylor said. "Everybody says they are not going to cut, and I'm not 100 percent sure. I think there will be serious discussions at the OPEC meeting about cutting."

Taylor, who at last year's Reuters Summit saw a chance of a steep fall in oil prices, said the major decline may have already occurred. "I'm not convinced we've got another big leg down," he said.

So far, the only specific call for a cut has come from Libya's OPEC governor - with the proviso that Libya itself is exempt. Venezuela said it and fellow member Ecuador are working on a joint proposal to support prices.


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johnwg | Nov. 7, 2014
Lets not get too carried away with the notion that OPEC will do what they have in the past. The evidence is that they have concerns about market share and have already offered lower priced oil to the US - presumably to back off the demand for home produced oil. Philippe makes a good point about the Kingdom not wanting to "go it alone" but to share the pain around the OPEC members.We do indeed live in interesting times!

Philippe | Nov. 5, 2014
OPEC is made of heavily populated members and some like Saudis Arabia made of small and sparsest population. The Saudis Arabia cut of the Brent crude oil as to be viewed on two fronts: The Saudi King does not need a large income to support its sparsest population. The kingdom has more than enough money saved and invested which will permit, the Saudis, to hold low crude oil price for a extended period of time. A year or two is possible. The OPEC members with large population which depend heavily on revenues from oil and gas will not be able to sustain low prices for long. Nigeria, Venezuela, Iran, are the principal members affected. Others non OPEC oil and gas producers will not be able to sustain low oil prices for long: Brazil, Russia, Mexico. What the Saudis are doing is pricing their crude so that once refined it is competitive with the GOM refineries export distillate products. The US oil producers cannot export “crudes”, but can export diesel, gasoline and other distillate products made from cheap US produced crude oil. That is the game the Saudis are playing. The EU has the golden opportunity to negotiate a long deal with the US. The EU refineries depend heavily of OPEC crude and Russian gas. Not only the Russian gas is important for winter heat, but the lack of gas forces the EU refineries to use Russian gas to generate the power necessary to power their refineries. All EU refineries cannot produce liquid petroleum products and be competitive with the Henry Hub NG prices. The Russian price is 3 times that of Henry Hub. The EU golden opportunity is to control OPEC’s EU market access and force Russia to be competitive with the US Henry Hub pricing. We are at the beginning of a new O&G market area, The US may be again, the European principal energy provider that the US was during WWII and the Marshal Plan. Let’s hope it happen!

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