UBS says giving up oil pact ‘not an option’ for Saudi, Russia – Energy,Saudi Arabia


OPEC and its partners, including Russia, need to extend their oil-production cuts for at least three more months to keep crude prices at current levels, according to UBS Group.
“Just out of necessity they will stick together,” Dominic Schnider, head of commodities and Asia-Pacific currencies at UBS’s wealth-management unit in Hong Kong, said in an interview in Moscow.
“Falling back to the old scheme with decent US shale-supply growth expected for next year is not an option.”
While oil returned to a bull market last week, it’s still trading at half mid-2014 levels on concern that output curbs by the Organization of Petroleum Exporting Countries and its allies won’t be sufficient to clear a global surplus.
The group’s current agreement expires at the end of next March, and as yet there’s no decision on extending or deepening the cuts.
Saudi Arabia wants oil-market stability given the planned share sale of its state-owned energy company Saudi Aramco, while Russia will also favour prices over production, according to Schnider.
For Russia, “price gains are more valuable than volume gains – how much can you really pump more from last year’s peak production level?” he said.
“We think they’re going to stick to the pact and over the coming months they are likely to extend it – hopefully for six months and not three months.”
Following a meeting in Vienna in September, OPEC and Russia said they were about halfway toward clearing the global glut and urged fellow producers to stay focused and finish the job, while stopping short of announcing additional action. They’ll meet again this week in Moscow to discuss the market and the mechanism for monitoring exports, Russian Energy Minister Alexander Novak said Tuesday, adding that no decision on extending the deal will be made.
Brent crude, the…

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