Opec chief says US-China deal could remove 'dark cloud' over oil markets

Mohammed Barkindo says talk of the Opec+ group deepening production cuts is 'immature'

Opec secretary general Mohammed Barkindo last year said the group was having talks with Brazil on possible membership. AFP

The United States and China are likely to reach a trade deal that will help steady a slowing economy that has depressed oil prices for much of the year, according to the secretary general of Opec.

“We are confident that there will be a deal and the deal will be positive for the world economy and will remove the dark cloud that has engulfed the global economy because of the size of the countries,” Mohammed Barkindo told reporters on the sidelines of Abu Dhabi International Petroleum Exhibition and Conference.

The US and China, the world’s biggest economies are embroiled in a tit-for-tat trade war that has kept oil prices largely in bearish territory this year. The two sides were expected to reach a deal this month at a summit in Chile, which was eventually cancelled due to political unrest in the country. A new venue for a signing of the deal by US President Donald Trump and Chinese Premier Xi Jinping is currently being looked at, with a location in Asia or Europe likely to be considered.

Opec+, as the alliance led by Saudi Arabia and Russia to balance the oil markets is known, has been cutting back 1.2 million barrels per day since the beginning of the year. The pact is expected to hold until March 2020. Talks of deepening the cuts is “premature”, Mr Barkindo said, noting the alliance members will need time to review current supply and demand situation as well as other factors.

“We have five technical meetings, very important meetings. We will review the current situation, not only the supply and demand but also other factors that are outside of our control. It is the combination of all these that will guide the conference,” he said.

The Opec conference will take place in Vienna on December 5 followed by a meeting with non-Opec members like Russia and other countries on the following day. Opec member countries will also take into account views of oil-consuming countries before taking any decision, he added.

Mr Barkindo also dismissed concerns of US supply squeezing out Opec’s market share and relevance, arguing that the destiny of the 14-member group is determined by its members.

“Our member countries are working together with non-Opec in the last three years, not only crafting an appropriate mechanism to address these challenges (shale production) but also implementing this mechanism to the satisfaction of all parties and the global industry,” Mr Barkindo said.

“This is a big fundamental difference which we have today which we didn’t have in 2014 at the start of the last downturn. We remain confident going forward.”

US shale production is expected to touch 13 million barrels per day next month, Francis Fannon, assistant secretary for the Bureau of Energy Resources at the US State Department, said on Tuesday.

However, Mr Barkindo said US shale production can be expected to decrease in the coming months due to various challenges, such as lack of investment.

Brent crude was trading 0.6 per cent higher at $61.66 per barrel at 5.55pm UAE time on Wednesday, while West Texas Intermediate, which tracks North American crude grades, was 0.4 per cent higher at $56.60.