Vagit Alekperov, the CEO of Russian multinational oil company Lukoil, has stated that he believes the various parties to the OPEC-led production cuts should give up on speculating about when the deal might expire. He believes this will give producers more flexibility in reacting to market conditions.
Speaking at Lukoil’s investor day in London, he said:
“I believe no timeframes [for the deal] are needed. [The deal’s participants] need to see how the market will react, to see firstly on stocks and how the market will react on the demand increase and then react flexibly — to increase or cut [output].”
Alekperov’s comments concur with recent comments by Saudi energy minister Khalid al-Falih, who sees cuts continuing past 2018 in some form. The OPEC-led deal came into force at the start of 2017 and has since been extended twice. There now seems to be growing momentum for some form of permanent mechanism to react to market conditions. OPEC officials are seeking to formalize their arrangement with Russia and other non-OPEC partners but no details have yet come forward, and Alexander Novak, the Russian energy minister, recently told reporters that no such proposals had yet been discussed.
Even with Russia on board, substantial oil production still lies outside the influence of OPEC. The United States in particular is enjoying booming oil production from its shale fields and the federal waters of the Gulf of Mexico. While it is profitable to do so, US producers like ExxonMobil, which also produces lubricants for Mobil UK stockists, will continue to pump oil.