Moneycontrol
Nov 30, 2016 12:48 PM IST | Source: CNBC-TV18

Crude may hit $45/bbl if OPEC opposes output cut: Jaipuriyar

Many important decisions have to be made at the OPEC meet, like the amount of production cuts to be made and the countries which will be exempt from cuts, says Jaipuriyar.

Crude prices will continue to remain as low as USD 45 per barrel if the Organisation of the Petroleum Exporting Countries (OPEC) disagrees to cut production when it meets today, says Mriganka Jaipuriyar, Associate Editorial Director of Platts.

Many important decisions have to be made at the OPEC meet, like the amount of production cuts to be made and the countries which will be exempt from cuts, says Jaipuriyar. 

US crude production has bottomed out. But there is a high probability that it may rise very soon, she says.

Below is the verbatim transcript of Mriganka Jaipuriyar’s interview to Manisha Gupta and Prashant Nair on CNBC-TV18.

Manisha: What is your sense, how much of a percentage chance do you give to the Organisation of the Petroleum Exporting Countries (OPEC)meeting come out with an agreement today?

A: I think it is really like what you said. It is anybody’s guess what OPEC is going to decide later today and like you mentioned earlier, a lot is at stake. What we have seen is the issues that were left unresolved back in Algiers in September remain unresolved and those were by how much should the production cuts be allocated, which production data should be used based on which the production cuts will be made and which are the countries that are going to be exempted from the production cuts.

So, these issues are still unresolved. There is a lot of haggling going on between Iran and Saudi Arabia on how much production Iran should be cutting and Iran, Saudi Arabia and Iraq, all have very strong feelings and this could well lead to the deal falling apart.

Manisha: In case we do not see a clear cut agreement go through, do you see a face saving agreement come across and how diluted would that be?

A: I think OPECs credibility is at stake. The fact that Russia did not attend the technical meeting and told OPEC get your house in order before you involve the non-OPEC producers, says a lot. Russia and Saudi Arabia were really working hard to come to an agreement and to work at this together. The fact that they have stepped away from this is, is already a sign of OPEC losing its credibility. So, a face saving agreement could come through.

However, is that really going to translate into actual production cuts? What the market needs right now is stability in prices and that stability will only come if some of the excess oil is removed from the exports. So, a face saving agreement may not necessarily lead to sort of price reaction that the markets, that the OPEC members are looking forward to.

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