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CCTV Script 22/09/17

— This is the script of CNBC's news report for China's CCTV on September 22, Friday.

U.S. oil prices settled modestly lower Thursday after reaching a nearly five-month high a day earlier.

So right before the meeting, the overall market atmosphere was to wait and see. Oil-producing countries, including OPEC members and Russia, will meet to review the implementation of production cuts and also to decide whether to extend the supply cut deal after March next year. These oil producers have been cutting a production of 1.8 million bpd. Currently, oil prices in the third quarter of this year have enjoyed quite some gains, raising about 15% in the past three months. This made it the strongest third quarter performance since 2004. Analysts said that credits should go to the recent low supply of oil globally. Indeed, this low supply is due to OPEC's pretty successful production cuts.

For example, on Thursday, Kuwait's oil minister said that most of the OPEC production cuts were going very smoothly, with cuts compliance more than 100%. What this means is that the implementation of production cuts has already exceeded what was promised previously. And in fact, these production cuts had also cause a tightening in global supply of crude oil. We can observe this trend from the price of oil futures.

In recent months, Brent crude's future prices have been much higher than the forward prices. We call this backwardation. This is an indicator that the market will continue to tighten because it encourages traders to sell their stored oil immediately instead of holding on to it. However, although we see signs of recent increases in oil prices, the market still thinks that OPEC oil-producing countries will still extend production cuts to beyond March next year as there are still two other risk factors.

Firstly, this is due to the black sheep in the OPEC family – Libya and Nigeria who were exempted from production cuts. Ever since other OPEC members began reducing production, these two had been increasing their production, ruining the overall impact of OPEC's production cut. So if OPEC decides to extend the reduction agreement in this meeting, will the new agreement change the exemption of the black sheep in the organization? Will it reduce the number of exempted countries or there by any changes in the agreement? These are what many are focusing on.

The second risk comes from US shale oil. In the Wednesday's report from the US government, it showed that US domestic crude oil inventories rose more than expected while production also increased significantly. Here at CNBC, we have discussed with a number of people in the industry and they think that,

US stockpile rose because of the recent hurricane. Many oil refinery companies were forced to shut down, causing an accumulation of oil. But this may improve after the hurricane season subsides. In addition, we also interviewed CEO of Royal Dutch Shell, Ben van Beurden. He believes that OPEC is still influential in affecting oil prices, as the share of shale oil in the market is still small.

[Ben van Beurden, CEO of Shell] "So yes i do think shale has the capacity to buffer, uh, but i would not say that has made OPEC irrelevant, far from it, OPEC is still a very very significant stabilising force in the market. bear in mind this is still a very small percentage of total supply picture. and also bear in mind that small imbalances in the market, 1, 1 and a half percent can have major effect on pricing, which is the peculiarity of our industry."

We also asked in the interview whether oil prices will remain within the range of 50 US dollars. Van Beurden said that we will never go back to the time where oil prices were above 100 dollars, but for now, they still have potential to increase by 10% to 15%.

[Ben van Beurden, CEO of Shell] "Well, you know, again hard to say because a lot of it will in the end be driven by sentiment but we said, you know it's not unreasonable to expect that, if you want to make, sort of, financial projections going out in the future you sort of... you want to make projections around 60 dollar oil by the end of the decade."

We will continue to keep watch.

CNBC's Qian Chen, reporting from Singapore.