Print Talking about cooperation between OPEC and Russia on the reduction of oil production are gaining a significant momentum. But the opportunity for a real decline in production is not so much.
oil production quotas OPEC
Russian Energy Minister Alexander Novak insists that in February Russia took part in the extraordinary meeting OPEC to discuss a possible reduction in oil production.
Initially, the proposal to hold an extraordinary meeting of the countries of OPEC asked Venezuela.
“It is necessary to work out a huge number of questions with regard to the reduction of oil production. And for this to come to some agreement. This is the theme of the forthcoming meeting in February, “- said Novak.
According to the plan, all parties to the agreement need to cut oil production by 5%. When Novak was asked how relevant these parameters, he said that “all this will be discussed during the meeting” to be held in February.
After Novak’s comments, oil prices soared on Wednesday and Thursday. Growth continues also on Friday.
The cooperation between Russia and OPEC on reducing oil production, as before, is now unlikely. But this time, Russia has changed the tone.
Saudi Arabia has hinted at a willingness to cut production by 5%, in case Russia will make the same step, but Moscow still have not seriously considered the question.
However, on January 26 in Moscow at the meeting of Russian oil companies with Russian officials discussed the forthcoming negotiations with OPEC about the decline in oil production.
«The meeting discussed issues related to the price situation on the world oil market, and the possibility of coordination with OPEC to reduce production of” black gold “,” – said the head of “Transneft” Nikolay Tokarev .
«The initiative comes, of course, Saudi Arabia – the main negotiator. With her, it is necessary to discuss this issue in the first place “- said Tokarev.
The level of oil production in the post-Soviet Russia broke a record in December, rising to 10.8 million barrels a day.
Many of the oil-producing countries are now again open to dialogue, which is badly needed against the backdrop of falling oil below $ 30 a barrel.
Iraqi Finance Minister said that the country is ready to participate in negotiations to reduce production.
However, do not rejoice too soon follows. After comments Novak four officials from OPEC said that they knew nothing about the upcoming February meeting, adding that the next summit of OPEC is still scheduled for June.
In addition, even if the Russian officials and are ready to seriously discuss cutting oil production as soon as this reduction will take place in reality, have to face a lot of problems.
It will be necessary to solve the question of the profitability of deposits. Moreover, there are several technical issues. For example, in the winter months Russia not be able to reduce the level of oil production.
Even more important is the fact that the Russian oil sector is not dominant in the economy, such as in the case of Saudi Arabia.
Therefore, investors should not rely too heavily on the fact that Russia will be able to change production as easily as the same as Saudi Arabia.
Dynamics of average daily oil production
Another obstacle is Iran. He is determined to return to the oil market as quickly as possible to increase production to 500 th. Barrels per day. It is difficult to imagine Iran, who voluntarily cut production after the lifting of sanctions. And to really complicate the situation, it is necessary to imagine the notorious 5-percent reduction in reality. What is the baseline? Below what level should go down those same 5%?
The levels of production for OPEC countries is constantly changing, some of them have succeeded in recent years. For example, Iraq managed to increase production by 300 th. Barrels per day in the period from October to December, breaking the record of 4.3 million barrels per day by the end of 2015.
The reduction of 5% only throw it to the level of October. It’s not as painful as, say, a reduction of 5% in Venezuela, where oil production in the same period was in very poor condition.
In other words, as long as this situation does not take concrete shape, talks regarding negotiations between Russia and the OPEC countries will remain just talk.
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