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OPEC deal will not lead to actual oil market offer contraction — analyst

September 29, 2016, 20:30 UTC+3 MOSCOW

On September 28, OPEC countries agreed to limit oil production to 32.5-33 mln barrels

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MOSCOW, September 29. /TASS/. The agreement to limit oil production to 32.5-33 mln barrels reached by OPEC countries at the informal meeting in Algeria yesterday will not lead to actual contraction of the market offer, Team Leader of the Russian Analytical Credit Rating Agency (ACRA) Natalia Prokhorova told TASS on Thursday.

"The uncertainty remains in respect of actual offer contraction on the oil market and probability is high that offer of more expensive (shale) producers will grow in case of the oil price hike," the expert said. The agreement reach anticipates oil market offer cut by 0.7%, she added.

OPEC members often breached quotas established within the framework of production level agreements in prior years, Prokhorova said. The recent limiting agreement was reached at fairly high levels, 10% above the average figure of 2014, when oil prices started plummeting.

"These levels are comfortable for the cartel members. Nothing is known whether non-OPEC countries join the freeze. If the agreement is met, it will bring the market closer to the balance and support prices," the expert said.

Volatility on the oil market will primarily affect the Russian economy through volatility of the national currencies, whose rate has even stronger dependency on the oil price, the expert said. "Probable oil prices growth will positively influence on budget revenues but will not solve the problem of budget deficit in 2016-2017," Prokhorova said.

ACRA is not revising its oil price outlook for the next year, the expert said. The agency assumes the average Urals oil prices will be $43 and $44 per barrel respectively in 2017 and 2018.

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