OPEC may come up with short, face-saving deal: Barclays

Crude oil prices have declined on doubts over the OPEC output cut. The OPEC will be meeting on Wednesday, November 30.The deal is likely to go up to the last day, believes Miswin Mahesh, energy analyst at Barclays. Saudi is expecting oil market to balance in 2017 without any intervention. Also, OPEC cut is dependent upon the US output. OPEC is likely to come up with a small, facing-saving deal of about three months and is likely to monitor the market till then, he said.Mahesh said that in terms of Saudi comments, it is more about managing expectations as till last week producers were positive about guiding the market. Below is the verbatim transcript of Miswin Mahesh’s interview to Manisha Gupta on CNBC-TV18.Q: Q: This is an important week and day after tomorrow that is Wednesday, November 30 the markets are watching out for the Organization of the Petroleum Exporting Countries (OPEC) meet in Vienna and ahead of that there have been a few statements coming out of Saudi Arabia. Today\\'s meeting between the oil producers OPEC and Non-OPEC has been called off after Saudi Arabia said that they were not attending this meeting. It started with a rocky start especially with Saudi Arabia statements what do you make of that and what are you betting on what side whether or not an agreement really would go through?A: I have a few comments around what has just happened over the weekend in terms of the Saudi comments. We think still that this deal is still going to go up until a very last minute of the OPEC meeting. There is quite a few on the wire discussion that will still take place. In terms of the Saudi comments it is more a case of managing expectations because up until a last week almost all producers were very positive in terms of guiding the market and telling them that things are going to be fine.However, this change of stance is just a classic game theory. We tried to manage expectations and also with the price fall sort of induce other participants such as Russia, they have as far as not been that keen to also participate more actively. So, show them a little bit of pain and see that this what is likely to happen if they don’t get a deal and somehow get a deal. So, I wouldn’t say all hope is lost yet, things are clearly not working in its favour right now but again this is a deal that could go up until the last minute.Q: When you look at the US market, productions from there has been rising, you have seen the rig count continue to gain, you also have seen the inventories continue to gain, so do you think this is one think that could really undermine OPEC at the last minute?A: That is one big consideration and we had Nigeria’s oil ministers say last week said even if OPEC does do a deal the big challenge is that US production is going to rise.The fact that price increased in the 2017 part of the curve and a lot of the US Shale producers have hedged already; they are already in a fairly good state.They have already hedged at USD 55-60 per barrel for next year and if OPEC does fail to get a deal you get a scenario where OPEC next year realises less revenues and US producers don’t have to cut back because they have hedged, so they are aware of that as well which is a bit of risk that they are running through with not getting a deal.