Echoes of the Asian crisis
In 1997-1998 the price of oil has fallen more than twice — from $25 per barrel of Brent at the beginning of 1997 to $10 in late 1998. The reason for the sharp decline of prices was adopted in 1997, the decision of OPEC about increasing production by 2.5 million barrels. on the day, as well as reduction of demand for oil in conditions of the Asian financial crisis of 1997-1998. In March 1999, the OPEC countries, but also Norway, Russia, Mexico and Oman have agreed on the General decline in production by 2.1 million barrels. a day. While countries outside the cartel were to reduce the production by 388 thousand barrels. a day. Russia promised to cut production on 100 thousand Barr. a day.
As told at the end of January 2016, Vice-President and co-owner of LUKOIL Leonid Fedun, he was one of the initiators of Russia’s negotiations with OPEC in reducing production levels, “Then the joint position of Russia, Norway, Mexico and Saudi Arabia led to the fact that prices turned around, and we had a long-term increasing trend”.
Indeed, for 1999 the oil played the previous fall, by the end of the year reaching about $23 per barrel of Brent, continued growth next year (to $32 in March 2000).
Countries that have concluded an agreement, in substantial compliance with it. In 1999, according to BP Statistical Review, Saudi Arabia production reached 8.9 million barrels. per day compared to 9.5 million barrels. a year earlier, production Norway not increased, remaining at 3.1 million barrels. in day, the production of Mexico has decreased from 3.5 million to 3.3 million barrels., but oil production in Russia increased slightly, from 6,17 million to 6.18 million barrels. a day.
The echo of 11 September
In 2001, world markets were again faced with a sharp drop of oil — from autumn to the end of the year, Brent crude oil fell from $36 to 20 per barrel. The cause of the fall of prices led to the recession of the American economy that followed the terrorist attacks in new York and Washington of 11 September 2001.
In response to the market situation, the OPEC countries during the year reduced production by 3.5 million barrels. a day. Expressing readiness to cut production by another 1.5 million barrels., the cartel demanded from non-OPEC countries, the total reduction of production on 500 thousand Barr. a day. In October 2001, then-President of Venezuela Hugo Chavez has warned of the danger of a price war, if the producers agree, is threatened by the fall in the value of a barrel up to almost $5.
At the turn of 1990-2000-ies of the largest Russian oil companies such as YUKOS, LUKOIL, TNK and Surgutneftegaz, controlled most of the export of raw materials. But the approaches to pricing in the market they professed different. Such companies, as LUKOIL, “Tatneft” and “Bashneft” did not have at that time substantial reserves and experiencing difficulties in field development, were delighted to support the rising prices. “Surgutneftegaz”, “Sibneft” and YUKOS had opposed cooperation with OPEC, hoping to displace competitors from European and Asian markets. As noted by (*.pdf) Professor Israeli University. Bar-Ilan Yossi Mann, the then head of Yukos Mikhail Khodorkovsky was the chief opponent of cooperation with the cartel.
But in the end, the cartel received promises to reduce oil production to 462 thousand barrels. (from Russia, Norway, Oman, Mexico and Angola). Mexico and Norway, the daily production which then was 3.4–3.5 million barrels. on the day, promised to cut oil production at 100 thousand and 150 thousand Barr. oil, respectively. YUKOS and “Sibneft” have dramatically increased production, and the Russian government first proposed to cut production to 30 thousand barrels. a day. Later an agreement was reached on the reduction of export of oil on 150 thousand Barr. a day. At the end of December 2001, the oil Ministers of OPEC countries met in late December in Cairo, where he announced a reduction of daily oil production by 1.5 million barrels. a day. Limited extraction was introduced in the first half of 2002.
Agreement on production cuts had a positive effect on the behavior of oil prices. Since the end of February 2002, they went up in September, reaching $30 per barrel. However, last week celebrated Oxford Institute of energy studies, Russian producers then actually has increased production by 300 thousand Barr. a day — their export flows they are redirected to the bypass controlled by the state of the pipeline system “Transneft”. Executives of Yukos, then, for example, has publicly announced that they intend to increase oil production by 12% in 2002.
The global crisis of 2008
As argued (*.pdf) in 2005, the former President of OPEC and the former head of the Algerian oil company Sonatrach Sadeq Bussen, in the coming years, “Russian policy toward OPEC will be based <…> on benevolent neutrality”. In the case of the collapse of prices that the parties will find a common language, he was sure.
As a result of the global financial crisis of 2008 oil prices showed an unprecedented drop in six months the price of a barrel of Brent fell from $143,95 (in July 2008) to $33,7 (in December 2008). On the background of the collapse in the oil market at the OPEC summit in September 2008, the countries of the cartel agreed to cut production by 4.2 million barrels. per day (i.e. about 5% of world production), up to 25 million barrels.
Russia then stood aside from the reduction in production volumes. Despite the fact that holding then a post of Vice-Premier Igor Sechin regularly visited the OPEC summits as an observer and urged the cartel to cut output, oil production in Russia is continuously growing. For comparison, in 2009, the daily production of Saudi Arabia declined from 10.7 million to 9.7 million barrels. on the day, while the Russian production has increased from 9.9 million to 10.1 million barrels. a day.
Sechin came up with the initiative to unite the efforts of all countries — producers of oil to control the commodities market, OPEC suggesting a mechanism of regular contacts, exchange of analytical information. These measures are deemed insufficient cartel — in December, the OPEC President, Shakib Khelil declared that the countries — exporters of oil or have to join the cartel, or to cut production. Sechin then rejected both proposals.
A reduction in oil production from OPEC then was enough — in 2009, oil stuck near $60 per barrel next year having continued growth.