OPEC forever

OPEC forever


Analyst Alexander Pasechnik — about whether Russia should support the decision of the cartel to “freeze” production

In the last days of November will be held the anniversary meeting of OPEC, which speculators expect certain results, namely the details on the “freezing” of oil production, promised recently at the Algiers summit. What are the chances to reach this consensus and how to act with Russia in case of reformatting the market of black gold?

Today consolidation of the global oil prices at above $50 per barrel with moderate volatility is quite comfortable for producers. In addition, the market that regularly “fueled” different kinds of statements. For example, during a Sunday meeting with the head of the energy Ministry of Russia Alexander Novak Minister of energy of Saudi Arabia Khalid al-falih spoke about the intention of his country to stabilize the oil market.

24 October in Vienna, the Russian Minister also met with OPEC Secretary-General Mohammed Barkindo, and then said that now comes the consideration of the quotas for the countries of cartel, and discusses the possibility of connection to the consensus of other major exporters, non-OPEC producers, particularly Russia and Norway.

As you know, before the Russian Federation has repeatedly declared its readiness to accede to the restriction of production, but not before a final decision is made within OPEC. On whether to limit the market said at the recent energy Congress in Istanbul, Russian President Vladimir Putin. He stressed that Moscow supports the cartel dialogue on “freezing” and willing to consider joining a “sensational” resolution. The Russian leader did not rule out the possibility that our country may participate in the agreement on “freezing” of production of black gold, if any, will be achieved.

Large-scale limitation in the industry and really could take place, but in what format is the big question. While all leading players from the middle East OPEC try to raise the production bar to the highest possible levels. Not far behind them and Russia.

Released in mid-October, cartel, the data showed that in September, when it was stipulated the cutting quota was extracted 33,39 million barrels per day, higher per diem than in August. Thus, OPEC continues to exceed its own limit on production was set at 30 million barrels per day.

Russia is also moving in line with the tendencies of a cartel: OPEC raised its forecast for oil production in our country in 2016 to 11.04 million barrels a day to 50 thousand barrels per day more compared with the September forecast. Moreover, the forecast production for 2017 is also the 11.04 million barrels a day.

It turns out that the players want to come to the November summit, OPEC “ceiling” of production, that if and to freeze collectively a production threshold, then at levels close to the record and does not infringe any of the participants “sunset” of the agreement.

In Russia, many leading companies have privately expressed support for the statement of the head of state. They realize that national production came to the ultimate level and will gradually come to naught. In such a situation to give a natural trend in the national production of artificial freezing — a witty decision. In addition, the expansion of the pool of “Zamolodchikov” only the strong will support prices.

As practice shows this year, speculators only welcome the discussion of “freezing”, allowing the bears to keep a reasonable price tag above $50 a barrel — with an eye on future growth.

So in November there is a looser sense to talk about “freezing” — main should be the horizon time. Better dimensional portions to feed the market: for example, it would be correct to say the first of the quarterly limits, and then to roll over as needed. This, of course, will maintain pricing on the market. But the threat to the agreement that at the steady state growth of prices on black gold again wakened slate miners in North America. This is a serious deterrent initiatives of the supporters of the “freezing”.

Another controversial issue is how to monitor the discipline of limits. Because, as you know, OPEC, even his report is not the first year States only failure to comply with the quota and all new cartel highs production.

In any case, all of the substantive arguments about whether or not Russia to limit oil production in order to win momentary a couple of dollars per barrel must not be categorical in favor of limiting. Be fascinated by the “freeze” in any case, cannot, by default, to join the possible restrictive resolutions of OPEC, in which the hegemony of the Arabs is their traditional “kitchen” with limits; for us it is a vanguard move, but in fact, the strategic risk of losing then, a kind of trap.

Mature export netcontact of the Russian Federation with India, Indonesia in addition to increase exports to China and retain position in Europe. And what we’re going to close the growing overall demand in the artificial inhibition of the projects now?

So to get a fix on the current ceiling and present it as the “freezing” of, say, three months — quite a profitable enterprise, a kind of winning the trick in which to participate, and to extract some experience.

Author — the head of analytical Department of national energy security Fund

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The opinion of the author may not coincide with the position of the editorial Board