Société Générale Questions OPEC Oil Cut Agreement; Russia Lying?

Two weeks ago MDN editor Jim Willis attended the “Platts Global Energy Outlook Forum 2016” held in New York City (see Harold Hamm Talks About Trump, OPEC, and Global Warming). Our previous report focused on the keynote address and Q&A with Continental Resources CEO Harold Hamm. However, there was a second keynoter–for lunch–that riveted the attendees’ attention. That person was HE Abdalla Saem El-Badri, the former Secretary General of OPEC. While the audience munched away on salmon and Cornish game hen, John Kingston, director of S&P Global Market Insights sat on stage with El-Badri and peppered him with questions, mainly about the recent OPEC agreement to cut production among member states by 1.2 million barrels per day, and a follow-on agreement by non-OPEC members (like Russia) to cut another 600,000 barrels per day. At one point Kingston grilled El-Badri about those cuts, recounting that several speakers during the day had voiced the opinion that there would be perhaps 70-80% compliance with the proposed cuts by OPEC and non-OPEC countries. El-Badri voiced his opinion that “there must by 100% compliance” with the stated cuts–otherwise the price of oil will not hit and remain at the target of $55-$65 per barrel. Kingston was, understandably, incredulous, and continued to hammer El-Badri on the point–but El-Badri did not relent from his position that all participants “must” adhere to the cuts in the plan. Kingston is not the only skeptic when it comes to the cuts. The analysts at banking giant Société Générale maintain (in so many words) that Russia, in particular, is lying and will not cut 300,000 barrels per day of production as promised. Here’s SG’s best thinking about what will happen with the OPEC and non-OPEC cuts, and their prediction that the price of oil in 2017 will not hit $55-$65, but instead stay in the $50-$60 range…

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