“the Worst period was passed in April, the market is gradually recovering thanks to the deal and OPEC+, and restoration of demand for oil and petroleum products in the world as of quarantine restrictions. Nevertheless, we note that while there is a lot of uncertainty. For this reason, we have taken the decision to extend the current parameters production may-June is 9.7 million barrels per day in July, to ensure that the market has stabilized and to reduce the risks of uncertainty,” said Minister of energy of Russia Alexander Novak following the meeting.
the Ease and rapidity (the meeting lasted just over an hour) that it was decided to extend the July record reductions should not be misleading. Rather, it suggests that special alternatives from the participants in the negotiations was not. The market had expected this, and if OPEC members+ did not meet expectations, then risked returning the quotes of a barrel to $ 20, off all won back in may the price increase.
If you imagine the sought of 9.7 million barrels per day in tons, the country agreed to lower production by approximately 1.3 million tons of oil per day for another month. Nominal production cuts only Russia is approximately 328 thousand tons per day. Alexander Novak said that in 2020 the oil production in our country will be 510-520 million tons, i.e. will fall due fulfillment of the terms of the deal, OPEC+ 40-50 million tons.
Everyone involved in the transaction to reduce production countries reaffirmed their commitment to its complete implementation. By decision of the Ministerial Committee OPEC+ defaulting to reduce the production of the country must do this in the coming months, as well as compensate the volume dropped to lower production in July-September of this year.
today, the 100% deal was completed, Saudi Arabia, UAE and Kuwait. Russia fulfilled its obligations by 96%. The main “offenders” were Iraq, which may have reduced production to less than half of the quota, Nigeria and Azerbaijan have reduced production only half of the required volumes, and Algeria, to have fulfilled its obligations only 7% of the quota. But even with this level of violation of agreements by OPEC+ managed to stop the collapse of the oil market.
“For Russia, such an extension of the deal is highly profitable, since the decrease is not increased, and the effect of the maximum quota reduction set for a once a month”, – said the head of the national energy security Fund Konstantin Simonov. He said that Russia, unlike Saudi Arabia will be hard to recover the loot from a purely technical side of production. In addition, this will not put off investment in new oil production projects that would have to do if d��istvuda terms of reduced production was extended until the end of the year as originally planned.
Also of great benefit for Russia will increase oil prices. Against the backdrop of major expenditures to restore the economy of the country because of the epidemic of the coronavirus additional revenue to the Treasury of the country, and even more so, if the stock barrel will allow the replenishment of the national welfare Fund, are not redundant.
Recovery in oil demand in Europe and the Asia-Pacific region has already led to record shipments of Russian Urals crude oil and ESPO suppliers. Moreover, the Russian mark Urals against tradition is now more expensive North sea Brent crude oil both in the East and the West.
the Optimism on the actions of the transaction OPEC+ and the removal of quarantine restrictions does not negate the remaining risks. Primarily associated with the second wave of the epidemic, which may occur in the fall and the rise of production in countries not participating in the transaction. As noted by Konstantin Simonov, the largest oil producer in the world – the United States has formally endorsed a deal to reduce only. The decrease in the production of “black gold” here only happened by natural causes, not succumbing to some kind of program or plan.
According to the Russian Ministry of energy, today’s oil production in the US fell by 1.9 million barrels a day, although on the American side sounded more serious figures. Hopes for support of the transaction OPEC+ from the regulator oil industry Texas also failed to materialize, and now, as prices rise, you can expect an increase in shale extraction, which is subject to possible recovery rate of production will have in the fall. Already, there are reports of growth in activity in the market of shale companies.
Also did not disappear the differences between Russia and Saudi Arabia that compete in the oil market, and is now a commonality of interests compels them to present a United front, said Simonov. In his opinion, the growth in oil prices, the contradiction between participants in the transaction will intensify, and only demand growth and shortages of oil in the market will flatten them. And in the best case, assuming no second wave of the pandemic, can only be expected by the autumn of this year.
the next meeting of the joint Ministerial monitoring Committee scheduled for June 18. Its meetings will be monthly until December 2020. The next Ministerial meeting of OPEC+, are already in person, plan to spend December 1, 2020 in Vienna.
