Editor's Note: Our Energy Policy analyst Joe McMonigle is in Vienna at the OPEC meeting. Below is an excerpt from an institutional note he wrote this morning.
As Ministers and delegations began arriving in Vienna on Tuesday, it’s becoming clear that only one OPEC+ country is strongly pushing the 9-month extension. Hint: they have an IPO planned in 2H 2018.
While ministers were conducting bilateral meetings on Tuesday at their respective hotels, an OPEC technical staff committee was developing a compromise proposal that was being billed as a 9-month extension that would be reviewed after 3 months at the May/June OPEC meeting next year.
This way Saudi Arabia gets a win of 9-months, and Russia can tell its oil companies they are only committed for another 3 months of cuts.
If Ministers approve the plan at Thursday’s meeting, the public relations and wording of the press release will be enormously important. The press conference will be conducted by Saudi Minister Khalid al-Falih, Russian Minister Alexander Novak and OPEC Secretary-General Mohammed Barkindo.
We expect OPEC will certainly promote the decision as a 9-month extension with a review after 3 months. In our view, the “review” is really an option to cancel after 3 months.
It will be important to monitor how the Russians portray the decision to their press corps as Russian media stories could undermine the 9-month extension narrative.
Regardless of the word play or emphasis, the reality is the compromise proposal is only a 3-month extension, which is exactly what we forecasted in a client note on October 31.
Meanwhile, Russian Energy Minister Novak made a late arrival in Vienna about noon local time today which is adding to the OPEC drama. As bilateral meetings continue this afternoon and a ministerial dinner tonight, the final outcome is very much fluid.