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The world’s top oil traders believe Opec will commit to maintaining their production cuts as long as Russia increases its compliance to keep the cartel’s most powerful members on board.

Speaking at the FT Commodities Global Summit in Lausanne, Switzerland, executives from some of the world’s largest independent trading houses said a push to draw down oil inventories would likely need to last at least for the rest of the year.

“There’s a feeling stocks aren’t drawing in the way they were meant to,” said Russell Hardy, chief executive of Vitol’s European, Middle East and African business. “At $50 there’s a lot of incentive for people to continue with the current policy,” though he cautioned a sharper recovery in prices could weaken Opec’s resolve.

Opec agreed to production cuts with other big producers like Russia totaling almost 1.8m barrels a day late last year. But in recent weeks prices have slid back towards $50 a barrel as US oil production has rebounded more quickly than many anticipated.

Compliance with the Opec-led cuts by the cartel’s members has been strong so far, partly due to bigger-than-demanded cuts from Saudi Arabia. However, Russia – the largest exporter outside Opec – has only executed about half their agreed cut.

“The onus is now on Russia to show they’re serious about this,” said Mercuria chief executive Marco Dunand, adding that he saw the market starting to tighten.

“If Russia come to the fold with non-Opec we’re going to see a floor around $60 a barrel.”

Torbjorn Tornqvist, chief executive of Gunvor, agreed cuts may be rolled over but said he thought Opec would be cautious, as too sharp a recovery in prices could trigger a further surge in US shale output.

“Is it in their interests to drive the prices too high?” asked Mr Tornqvist

“They are well aware of what caused the crash in the first place.”

Copyright The Financial Times Limited 2017. All rights reserved.
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