MOSCOW, October 21. /Corr. Maria Todorova, Nikita Zharkov/. Representatives of the countries of the Organization of countries-exporters of oil (OPEC) and countries outside the cartel, will discuss on Wednesday in Vienna a new sector strategy. The Ministry of energy of the Russian Federation at the meeting will be the Director of the Department of international cooperation of the Ministry of Ilya Galkin.
In addition to Russia, the invitation to the meeting had seven members of the organization countries: Azerbaijan, Brazil, Kazakhstan, Colombia, Mexico, Norway and Oman.
It is expected that during the meeting, Venezuela will propose that OPEC’s new strategy of increasing oil prices, which involves a gradual decline in production countries. In this strategy, the price must not fall below $70 per barrel. Yesterday the price of the futures contract on the supply of oil with delivery in December at the auction of the London exchange ICE was $48 per barrel.
At the meeting in Vienna will be attended by the President of Venezuela, Nicolas Maduro. “I continue to offer the level of $70 per barrel, said Venezuelan leader in his speech on October 13. – The global economy requires that in the coming years the prices of its main source of energy – oil – remained stable”.
The high level of volatility in the global oil market has a negative impact on the economy of Venezuela. According to analysts, the loss of the South American country from January to July amounted to $13-15 billion Maduro addressed separately to Saudi Arabia and the US in this regard. And as part of his overseas tour (Vietnam, China, Qatar and Jamaica), he proposed to Russian President Vladimir Putin and the Emir of Qatar Sheikh Tamim bin Hamad al-Thani to hold a joint summit of the members of OPEC and other major oil exporters, to discuss the adoption of measures to stabilize world prices for the energy carrier.
Mexico has already expressed that they will not cut production of oil. The Minister of energy of Latin American countries Pedro Joaquin Caldwell recently stated that Mexico plans at a meeting on 21 October “to receive information and share it with other manufacturers, but will not participate in the reduction of volumes of extraction”. In July of this year daily oil production in the country was at the level of 2,39 million barrels, the lowest level since 1995.
While OPEC countries continue to increase production. OPEC in its October report increased the forecast of oil deliveries to the countries of the organization in 2015. OPEC expects growth of 600 thousand barrels per day compared to 2014 year to 29.6 million barrels a day. The forecast for 2016 increased by 500 thousand barrels next year, OPEC is planning to supply the market of 30.8 million barrels per day.
Iran will not observe OPEC quotas
Iran, in turn, plans to increase oil production by 500 thousand barrels per day from the day of lifting of sanctions. The Minister of oil of Iran Bijan Namdar Zangeneh said on 19 October: “We don’t need to ask permission from anyone to export our oil, and our products will enter the market”.
If OPEC will act rationally, it will create conditions for the gradual transition of Iran to the market, added zangana. Iran plans to increase oil production in three stages – first 500 thousand barrels after the lifting of sanctions, and then to 4.2 million barrels per day – that is, to the level that was achieved before the introduction of sanctions. The third stage will mean a rise of production by 2 million barrels to 6 million barrels of oil per day.
Analysts polled believe that on Wednesday the meeting will discuss the return of Iran to the global oil market. Thus Raiffeisenbank analyst Andrei Polishchuk said that Iran may not comply with the OPEC quota.
“I think this meeting might be connected with the lifting of sanctions with Iran, but I don’t think a concrete decision will be made. Iran insists that it has the quota not applicable. It can be understood. Maybe it will not impose additional restrictions. And if they do, Iran to abide by them will not” – said Polishchuk.
The analyst stressed that for Iran on the world market may need a reduction of oil production, for example, Saudi Arabia. “In other countries there is no common opinion. Might be talking to someone, Saudi Arabia, for example, reduced production for Iran,” he added. According to Polishchuk, it will positively affect the oil prices.
Analyst of Sberbank CIB Valery Nesterov sure that any decision on output cuts at a meeting on 21 October will not be accepted. “These meetings are taking place with countries outside OPEC before the OPEC meeting to develop a position formally. It is clear that nothing will be taken at this time. This is a fairly efficient meeting, when market participants use to track their perception of the situation on the market,” he said. According to Nesterov, “these consultations are theoretically needed to improve the quality of decisions”.
Russia will not cut production
Russia has repeatedly opposed the reduction of oil production. Energy Minister Alexander Novak stated that this is impractical. “Periodically (on the issue of lobbying OPEC to reduce world oil production – approx. ed.) to us, Venezuela, Algeria, Ecuador. Our position has not changed, we believe that the artificial reduction will not do any good, will only aggravate the situation in the future. It can bring effect only in the short term,” he said in September.
Then in October, a similar position was expressed by Deputy Minister Anatoly Yanovsky and Deputy Alexey Teksler.
Oil companies of the Russian Federation noted the impossibility of artificially reducing oil production. According to the head of LUKOIL Vagit Alekperov, Russia failed to agree with OPEC on limiting production due to technological peculiarities of production of oil in Russia.
“We have a difficult field, most of them marginal. Stop well is impossible, since it required considerably more money than to stop. And sometimes the well will never run”, he said.
The head of “Gazprom oil” Alexander Dyukov said that by increasing production by Saudi Arabia and Iraq have appeared on the market 2 million barrels extra. If OPEC will take these volumes, world oil prices may return to $65 a barrel to the end of the year, he said.
Experts insist that the maintenance of oil production level in Russia depends on investment in the industry and not by the decisions of OPEC. “Russian companies are their plans for the extraction is not particularly watched, they could potentially offer some reduction in oil production. But production and so will be in Russia to fall, if the investment does not come at the proper level,” said UBS analyst Maxim Moshkov.
The President of “Rosneft” Igor Sechin in his speech at the investment forum “Russia calling!” said that the role of OPEC is to regulate oil market actually moved to the United States. “The regulation that was previously performed by the countries belonging to the OPEC organization, was formed at the regional US market, which has become the most important region on a global scale”, – said Sechin.
According to Sechin, the price of $70 per barrel “critical” for investments in the development of new deposits.
In the part of OPEC includes 12 countries: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador and Angola. The status of observer countries in OPEC are Mexico, Egypt, Oman, and Russia, which participates in the sessions of this organization since 1998.