Russia production will not drop

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Россия добычу не понизит

Saudi Arabia is the second time offers Russia to cut oil production, and Moscow is once again refuses. Russia, record-breaking production, is interested in freezing the level of production, but not in its decline. In the future, Russia’s position could derail the outlined agreement of the OPEC countries, which decided to cut production, but not alone, and in parallel with the players outside the cartel.

Russia has refused to cut oil production. About it reports on Thursday Reuters with reference to its sources. According to the Agency, a proposal to reduce production by 4% came from Saudi Arabia and other Persian Gulf monarchies, members of the Organization of countries — exporters of oil (OPEC). Reuters says that negotiations on this issue was held on October 23 in Riyadh, where he held the 35th session of Ministers of oil of the regional Commonwealth in which took part the head of the Russian Ministry of energy Alexander Novak.

The Russian side agreed only to freeze the level of production, but not to reduce it.

Novak after talks on 23 October said that Russia is not yet ready to announce his decision about reducing or fixing the level of oil production. The energy Ministry on Thursday declined to comment on the Reuters story. Friday, October 28, at Vienna should begin consultations at the expert level on measures to stabilize the world oil market.

In late September, the OPEC countries signed a preliminary agreement to freeze production at 32.5 million barrels per day. Given that in August, according to the cartel, the OPEC countries extracted in conjunction 33,23 million barrels a day, in this case talking about production cuts. By the way, in September daily production of OPEC was already 33,39 million barrels.

In September, Russia produces about 11 million barrels per day (20 September had set the historical record — 11.09 bbl.). If you start from these figures, production in Russia is expected to be reduced by 440 thousand barrels per day.

By the way, the oil Minister of Venezuela, Eulochio del Pino, who was in Moscow on a visit on Tuesday, following the visit said that OPEC offers to the countries outside the cartel to reduce production by 400-500 thousand barrels.

Thus, it seems, was just about Russia.

As for Saudi Arabia, it is, according to OPEC in September was mined of 10.49 million barrels. a day. That is, the Saudis have cut production by around 420 thousand barrels. — if to speak about a 4 percent decline. Previously Algeria had proposed a scheme in which SA will cut production of 440 thousand barrels.

Saudi Arabia has offered Russia to cut production by 5% at the end of January. At that time it meant a reduction of about 500 thousand barrels per day. Then information about the decision of Russia, but later came the idea of reduction, and fixation of production at January levels, which was initiated by, again, Russia, Saudi Arabia and Venezuela.

The initiative was discussed until mid-April, when the conclusion of a final agreement fell through because of the position of Iran (Iran refused to freeze production, indicating that only in January was acquitted of Western sanctions, limiting exports — and hence oil production). Now Iran, by its own statements, went to the pre-sanctions level (4 million barrels. per day) and willing to support freezing.

But acts against Iraq, claiming that he should be relieved from liabilities for committed, or the decline, as at war with terrorists.

“Russia has always been for the freezing of the production level, not decrease, – says senior Vice-President of Argus Vyacheslav Mishchenko. And it is worth considering that within OPEC itself now comes a difficult game.”

Mishchenko recalls that Russia is now at the peak of production and export, and it is difficult to imagine a mechanism by which to reduce production.

“In Saudi Arabia, the oil produced by Saudi Aramco, the state actually controlled by the Royal family. Saudis have a mechanism of authoritarian – like Mishchenko. — In Russia there is, for example, fully private “LUKOIL”. And in the capital of the state “Rosneft” there is such a major shareholder, British BP (it owns a 19.75%. — “Газета.Ru”)”.

At the same time, most OPEC opinions are divided. Saudi Arabia is lobbying for the reduction or at least freeze (this is also extremely interested Venezuela, on the verge of complete economic collapse), but against Iraq and, according to Mishchenko, Iran. “Despite statements by the Iranians, it seems that they do not intend to limit production, as Iran is an old rival of SA — says the expert. — That Saudi Arabia actually pulled the Iranian OPEC quotas on production in the period of economic sanctions against Iran”.

The Islamic Republic of Iran, by the way, in the beginning of the year first stated that it supports initiatives to stabilize the oil market, but then suddenly started talking about what she needs special conditions.

But if in April the agreement on the freezing of fell through due to internal differences, OPEC is now under threat because of the position of countries outside the cartel, in the first place — Russia.

OPEC members may opt out of production cuts, if not go for it. And Russia with its position here is not alone. Norway had earlier said that he did not intend to participate in the negotiations. The head of the Azerbaijani state oil company SOCAR Rahman Gurbanov last week said that SOCAR had never planned to reduce production, but rather intends to expand it. However, later the President of Azerbaijan Ilham Aliyev stated that his country is to increase production will not and undertakes a unilateral commitment not to increase the production and export of oil, as it is necessary to stabilize the market. But about the reduction of production, Aliyev did not say anything.

However, by themselves talks about the possible freezing or reducing the level of production the market for a long time considers only verbal interventions that will lead to real agreement, but are only employed to maintain price level.

“Fundamentally, the oil market do not change, the excess supply of both was, and remained, says Mishchenko. But there are a lot of financial institutions playing on the market who earn large amounts when oil prices are rising or falling on verbal intervention”.

So far, however, oil prices on the latest news almost do not react. On Thursday evening, October 27, the price of December futures for Brent crude was $50,83 (+1.6 percent) per barrel.

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