Next OPEC meeting: inaction against circumstances

Next OPEC meeting: inaction against circumstances


MOSCOW, 4 Dec. The organization of countries-exporters of oil (OPEC) at the upcoming December 4 in Vienna alternate, 168-m, the meeting will not reduce the quota for oil production from the current 30 million barrels per day, the oil and gas market participants and industry experts.

However, the omission (in the form of preservation of quotas at the current level) will be given to OPEC increasingly difficult: on the agenda the lifting of sanctions with Iran, the return of the organization of Indonesia and the struggle for markets, including with Russia. Some analysts do not exclude that in these conditions, OPEC can go, even at some increase in the quota, although such a decision would be extremely unfavorable for the market.

“We can analyze the technical and fundamental reasons, but can they do something unexpected,” says the head of the British branch of Alfa Energy Group John Hall.

That OPEC will not reduce quotas on oil production, said in November, and the Minister of energy Alexander Novak, and Iranian oil Minister Bijan Zanganeh. In this agreement and Hall, and Vygon Consulting senior analyst Maria Belova, an analyst Raymond James and Luana Siegfried.

NEGOTIATIONS ON THE EVE OF

On the eve of the OPEC meeting Thursday, the Ministers of member countries of the organization held preliminary consultations, the results of which journalists and didn’t know.

“We will continue our consultations with members of OPEC (to change the size of the production quotas — ed.),” limited duty phrase the Minister of oil of Iran Bijan Zanganeh. He also said that the meeting discussed the proposal of Venezuela on the reduction of production in the OPEC countries by 5%.

Will the proposal support — is unknown. “You should ask Venezuela,” he replied to a question, Minister of oil of Saudi Arabia Ali al-Naimi.

At the same time, in October, OPEC reduced oil production by 256 thousand barrels per day — up to 31,38 million barrels per day, from the November report of the organization. Thus, despite the decline, in October, OPEC has again exceeded its own stated quota for extraction to 30 million barrels per day. The share of OPEC in global production in October has decreased on 0,2%? to 33.3%.

SAUDI ARABIA IS FIGHTING FOR MARKET

Despite a slight decline in production in October, Saudi Arabia remains the largest OPEC member: according to the November report of the organization, the country produces roughly a third of the OPEC quota? 10.1 million barrels of oil per day. The interests of this country in OPEC accounted for in the first place, and the main objective of Saudi Arabia is to preserve its share in the oil market, experts say.

“Saudi Arabia is the only OPEC member that can significantly reduce the production of oil, but she has learned that if you do so, other OPEC members and countries outside the organization, will take its market share,” says Hall.

“Allowing the oil price to remain at the current level, Saudi Arabia is hoping that other manufacturers may agree to cut oil production and that projects the production of shale oil will be suspended,” he said.

The head of “Rosneft” Igor Sechin, for its part, noted that Saudi Arabia seeks to increase market share including at the expense of Eastern Europe (traditional market for Russian oil Urals), increasing production in the face of low prices. According to Sechin, this strategy does not bring significant gains, and forced to spend tens of billions of sovereign funds.

Saudi Arabia, however, confirms that maintaining market share is a strategic goal. “Who said we have a strategy to protect market share? Have I ever said that before?” said this week the Agency Bloomberg, the oil Minister of Saudi Arabia Ali al-Naimi.

IRAN AND INDONESIA COME TO GRIPS

At the upcoming OPEC meeting in Saudi Arabia will be a serious opponent, which might extend beyond the reduction in oil production, Iran. On Tuesday, Zanganeh has sent a letter to the Secretary-General of OPEC Abdullah al-Badri with the request to keep the quota at 30 million barrels a day and reduce excessive production in anticipation of the lifting of sanctions against Iran, reported the Mehr Agency.

Tehran for 5-6 months plans to increase oil production by about 1 million barrels a day, said in November the Deputy oil Minister of Iran, Amir Hossein Zamaninia. He explained that the country plans to increase production within OPEC quotas at 30 million barrels of oil per day.

“A real working mechanisms for the limitation of oil production by Iran in the cartel there is no” — said Belov. “The idea is that to maintain the oil production of other countries of the organisation at the current level, given the increasing production by Iran, the quota should be increased. But today it would be a negative signal for the market,” she adds.

“In the near future we do not expect significant changes in the volume of oil production in Iran, because sanctions will be lifted only after the special inspections of nuclear facilities,” says Siegfried.

In addition, at the December OPEC meeting will be replenished with another member of Indonesia returns to the organization after the suspension of its membership in 2009. According to Belova, this must be accompanied by a “technical correction of existing OPEC quota in the direction of their increase, given the current level of oil production of Indonesia, about 0.9 million barrels per day.” The quota increase may be delayed until the summer of 2016, she said.

“In the current market conditions the organisation’s staff takes a cautious approach to this issue, noting that it will be a technical correction, which will not lead to increased oil production in the world”, — said the expert.

RITUAL DANCES INSTEAD OF COORDINATION

In conditions of low oil prices and while maintaining the production level at OPEC remains only one option possible impacts on the oil market is to try to coordinate their actions with other oil producers outside the cartel.

In November, the government of Saudi Arabia said it was ready to cooperate with oil producers and oil exporters within OPEC and outside the cartel to provide stability in oil prices. While al-Badri said that to reduce the supply of oil to the world market needs of countries outside OPEC.

Oil companies of the Russian Federation is ready to compete with the countries of the OPEC the redistribution of production and even when they increase, said in October the Minister of energy of Russia Alexander Novak.

Meanwhile, Russia has repeatedly expressed its readiness to discuss with representatives of the OPEC the situation in the oil market. According to the Ministry of energy of the Russian Federation, a regular meeting at expert level will be held in mid-December. Previous meeting of experts of the OPEC countries and other States took place in October in Vienna. Similar consultations were held last year.

“We are in dialogue for more than 15 years (Russia is an observer in OPEC since 1998). But for now it is more like a ritual dance than work out joint measures to stabilize the oil market. On the contrary, lately the actions of some members of OPEC for output to traditional Russian oil markets in Eastern Europe show that friendship is friendship, and snuff apart. Therefore, Russia should continue to act according to the principle of “every man for himself”, — said Belov.