OPEC makes another attempt to negotiate a freeze in the level of oil production, which should support still unstable prices of these raw materials. What is happening in the oil market, what are the interests of the key players, whether OPEC to reach an agreement and what should be the position of Russia on this issue?
The chances for the deal to freeze the level of production by OPEC countries and Russia have become even more elusive. The Minister of oil of Iran Bijan Namdar Zanganeh confirmed on Tuesday that Iran and Saudi Arabia agreed at a meeting in Vienna. “Yes, we met (in Vienna). But we need more time for consultations,” reports his words TASS. The Saudis and the Iranians are trying to agree on the method of calculation of volumes of oil production that is key to negotiations about a possible freezing of the production level reported by the Wall Street Journal.
“Solutions will not freeze, no freeze, nothing was going to. Many players, on the contrary, increasing production, as there is competition”
Monday in Algeria is hosting the international energy forum (IEF). The forum will hold an informal meeting of representatives of OPEC countries.
The main condition of freezing that it went to all members of the cartel. And the main difficulty is to negotiate with Iran, who wishes to increase production after years of sanctions. According to estimates by Reuters, now Iran produces 3.6 million barrels a day. Saudi Arabia said it was willing to reduce production, returning to the figures of January, if Iran will be left with 3.6 million barrels a day. However, Iran wants to increase production to levels that were before sanctions – is about 4 million barrels a day.
Iran, apparently, to persuade fails. The oil Minister of Iran said Tuesday that arrived in Algeria only “to exchange views” about the possible freezing of the level of extraction of raw materials or reduction.
Russian energy Minister Alexander Novak also skeptical. He said that the agreement on the freezing of oil production did not “critical” for Russia. Because, in his opinion, regardless of agreement in Algeria rebalancing of the oil market will occur in the second half of this year. On Tuesday, Novak said that Russia has not even decided whether it will participate in the informal OPEC meeting in Algeria. This, he said, will depend on the arrangements within the organization. Thus the question of when the meeting will be held, the Minister said: “today Or tomorrow”. Used to be called September 28.
If the OPEC countries will agree on any scheme of fixing of production volumes, it will give the impetus for the growth of oil prices. “After a year of lower production in the US production growth in OPEC countries supports the surplus supply of oil in the world. So much in achieving a balance of supply and demand of oil in the world depends on the behavior of OPEC”, – the chief of analytical Department IK “Zerich capital Management” Nicholas Podlevskikh.
However, the participants themselves, and the market don’t believe in it. “All live expectations. Tomorrow they will appear. But how I feel, tightened waiting to freeze for another two months – until the jubilee meeting of OPEC. Solution will not freeze, no freeze, nothing was going to. Many players, on the contrary, increasing production, as there is competition,” – says the newspaper VIEW Deputy Director of the national energy security Fund Alexander Pasechnik.
Increasing production not only Saudi Arabia and Iran, but also Russia, where it recorded new highs in production – above 11 million barrels per day. Just recently, Gazprom Neft and Rosneft began commercial operation of a large field – Vostochno-Messoyakhskoye.
“We are introducing new fields, the Saudis are also at peak production. Further, it is hard to be a natural way to raise production. All ran into a natural ceiling. Beautiful, of course, would be to give a natural ceiling for the agreement,” – says beekeeper.
However, it is likely that OPEC will make a neat statement tomorrow after the meeting, so not much to derail oil prices “verbal interventions”. “Specifically about anything you do not agree, but there would be some wording with ornate tails and new dates,” – says beekeeper.
The experts agree with Novak that neither for Russia, nor in General for the market tomorrow nothing bad will happen. The situation this year different from last year, so the lack of agreement should not have a strong impact on oil prices. “This year the situation is more balanced, it is different from what it was a year ago. Therefore, the oil and went from lows in the 30 to almost $ 50 per barrel,” – says beekeeper.
Some players are increasing production, but in some countries, cheap oil has triggered the decline. “First and foremost, this applies to Venezuela, where swept the country’s economic crisis has caused decline in the production of 200 thousand barrels per day. Feel uncomfortable shale companies in the US, which reduced production by 1 million barrels per day in 2015. Civil war continues in Libya, and in Nigeria, armed groups continue to attack oil infrastructure,” says Valery Polkhovsky from Forex Club.
The amount the market has gone about 2 million barrels per day, considered an expert. And despite the fact that the rate of demand growth of 1.2 million barrels per day annually, and this trend, in his opinion, will continue at least until 2020. According to Wood McKenzie, in 2016, will open new reserves 10 times less than the annual average for the last 50 years.
What happens if at a meeting in Algeria, OPEC members did not agree about anything? Of course, it may reduce oil prices. “For some time, Brent may try to trade below $ 45, but in the longer term, prices will still move upwards. Apparently, the participants understand it,” – says Polkhovsky.
“Now there are several million barrels a day of excess. Therefore, the market will behave. Speculative volatility, of course, may be present, but in General prices now makes no sense to go below $ 45”, – the expert expects the NESF. For Russia it is quite comfortable.