Workers collect samples of crude oil in bottles at a multiple well platform in an oilfield near Nizhnevartovsk, Russia. (Photographer: Andrey Rudakov/Bloomberg)

OPEC Negotiates Cuts After Saudi-Russia Deal

(Bloomberg) -- Saudi Energy Minister Khalid Al-Falih said he saw an oversupplied oil market but that it’s “premature” to say what OPEC and its allies will agree in Vienna this week. The comments come just days after Russia and Saudi Arabia agreed to extend their cooperation to balance the oil market into 2019.

In an interview with Bloomberg, Al-Falih said Moscow backs output curbs “in principle,” but that all the members of the so-called OPEC+ group, which includes Russia and Kazakhstan, needed to come together for a cut to go ahead.

The OPEC advisory committee recommended a cut of 1.3 million barrels a day last week, but since then the group got an unexpected hand from Canada’s 325,000 barrels a day reduction.

Last month the cartel held its production steady as record oil output from Saudi Arabia helped offset losses due to U.S. sanctions on Iran. Following are the latest positions of most of OPEC, plus non-members Russia and Kazakhstan. The respective shares of supply are based on October output. Estimates for the price each member needs to balance its 2018 budget are from the International Monetary Fund, unless otherwise specified.

Algeria

Price needed: $105.70
Share of OPEC production: 3.5%

Algeria relies almost entirely on oil and gas revenue for hard currency and was one of the key architects of the production-cuts deal in 2016. Sonatrach’s chief executive has said an oil production cut of 1 million barrels a day is needed to stabilize prices and that he sees oil within a $70-80 a barrel range as right for consumers.

Angola

Price needed: $78 (RBC)
Share of OPEC production: 4.5%

Oil is the biggest source of revenue for Angola and the southwest African nation unveiled an 11.3 trillion kwanza ($36.4 billion) budget in October based on an oil price of $68 a barrel. Ruth Mendes, the chairwoman of the Economy and Finance Commission, said there was “general concern among lawmakers and government officials,” that crude prices had fallen below that level. The country’s crude loadings are expected to fall to the lowest in at least 10 years in January.

Iran

Price needed: $68.10
Share of OPEC production: 10%

Under renewed U.S. oil sanctions, Iran’s crude output fell 230,000 barrels a day last month to 3.09 million, according to a Bloomberg survey. Last month the country’s exports went to just two known locations: China and India, but that may change in December after some countries were unexpectedly granted waivers from U.S. sanctions.

Iraq

Price needed: $54
Share of OPEC production: 14%

Iraq may be an obstacle to any coordinated oil production cut because of its relentless supply growth. It resumed pumping crude for export by pipeline from northern fields last month and is expanding capacity to produce at its main deposits in the south. Iraqi output could reach 6 million barrels a day by 2025, according to consultant Wood Mackenzie Ltd, up from 4.65 million in October.

Kazakhstan

Price needed: $60.60

Central Asia’s biggest oil producer has also consistently breached its output quota throughout the agreement. Last month its oil output reached a record level of 1.98 million barrels a day. It may want any agreement for production cuts to be from this high baseline.

Kuwait

Price needed: $48
Share of OPEC production: 8.4%

Kuwait, a close ally of Saudi Arabia has been a consistent cutter and traditionally follows the kingdom’s lead. Last month Kuwait’s Oil Minister Bakheet Al-Rashidi said in an interview that “we don’t talk price, we talk stability” when asked whether the country would support further production cuts. In October Kuwait produced 2.76 million barrels a day, according to the IEA. Its 60 percent compliance rate was up from 44 percent in September.

Libya

Price needed: $132.80
Share of OPEC production: 3.4%

Libya has been exempt from production caps because its oil industry is recovering from a civil war. That has allowed the country to make substantial output gains, stabilizing production over 1 million barrels a day. Libya’s oil revenues have soared as a result of it boosting exports. The country’s state oil firm National Oil Corporation expects its full-year oil revenue to reach $23.7 billion, a rise of 73 percent from last year.

Nigeria

Price needed: $124 (RBC)
Share of OPEC production: 4.6%

Nigeria has also been exempt from cuts as it struggles to maintain steady output due to militant attacks and leaks from oil pipelines. Oil minister Emmanuel Ibe Kachikwu said last month that Nigeria remains committed to OPEC+ but that it is too early to say to discuss whether it could secure an exemption from future agreements. Loading programs complied by Bloomberg show Nigeria plans to boost exports of its main crude grades to a six-month high in January.

Qatar

Price needed: $47
Share of OPEC production: 1.8%

Qatar, which has been an OPEC member since 1961, announced Monday that it will leave the producer group from January to focus on its liquefied natural gas production. Qatar’s departure from the group will not have a significant impact on its production as it comprises just 2 percent of the total. The decision comes amid a Saudi Arabia-led economic blockade against the country that began in 2017.

Russia

Price needed: $40 (Energy Ministry’s budget rule)

Officials from Russia and Saudi Arabia met in Moscow at the weekend and agreed in principle to extend the production cuts deal into 2019. However the details have not yet been agreed. Putin said last month that oil prices around $60 a barrel are “absolutely fine” for Russia and that the country’s planned budget expenditures in 2019 are based on an oil price of just over $43 a barrel.

Saudi Arabia

Price needed: $87.90
Share of OPEC production: 32%

Saudi Arabia spearheaded the OPEC+ production curbs two years ago, then led their rollback in June on concerns that U.S. sanctions on Iran could create a supply shortage. Now, it’s agreed in principle to extend cooperation with Russia into 2019, although there’s no deal yet on the size of any cuts. President Donald Trump has been pressuring the kingdom to keep the taps open, so a significant reduction could provoke his wrath.

Venezuela

Price needed: $223 (RBC)­­
Share of OPEC production: 4%

Venezuela’s oil production has plummeted as the country’s economic and humanitarian crisis continues to spiral out of control. Venezuela has reason to throw strong support behind reducing output at OPEC’s December meeting to bolster prices. The IEA estimates the country’s production has fallen by 140,000 barrels a day since May, down to 1.26 million barrels a day in October.

©2018 Bloomberg L.P.