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Chatter is on; Saudi Arabia continues to abide by the crude oil reduction agreement, while Russia is lagging behind.
These two major global oil producers are key to the success of ongoing efforts to stabilize oil markets. When Saudi Arabia and Russia, as well as other countries of the Organization of Petroleum Exporting Countries (OPEC) and some non-OPEC crude oil producers, have united their efforts to reduce their production in order to overcome the overabundance of the market, oil prices have fallen. The oil producers had to change the scenario. And they did it.
The reason behind the effort was obvious. After all, most crude oil producers depend to a very large extent on oil revenues to balance their budgets.
Thus, to tighten the crude oil markets, OPEC member states and non-OPEC producers, led by Russia, agreed at the end of 2006 to reduce crude oil production by 1.2 million barrels a day. . According to the agreement, Saudi Arabia was to badume 40% of the total burden of OPEC while Russia had agreed to absorb 60% of the total reduction in production outside the country. OPEC.
Riyadh seems to keep its promise and continues to do so. In fact, Saudi Arabia cut even more than expected. In January, it reduced production to 10.213 million bpd, according to secondary source data. This was well below Saudi Arabia's consent to reduce production to just over 10.3 million bpd.
In fact, Saudi Arabia has announced plans to reduce production by an additional 400,000 barrels per day to 9.8 million barrels per day in March. If this is achieved, it would mean that since December, Saudi Arabia has become responsible for 70% of the total goal of Opec Plus.
Russia's performance, however, has been mediocre – to say the least. From October to early February, Moscow production decreased by only 47,000 b / d. Russian Oil Minister Alexander Novak said at the time of the agreement that his country would reduce its output by 230,000 barrels a day in the first quarter and its January output would be 50,000 to 60,000 barrels lower. October. However, Moscow did not even achieve this modest goal and, according to Bloomberg's calculations, it only reduced production by 42,000 b / d.
Russia's less-than-agreed reduction in production sparked public criticism from Saudi Oil Minister Khalid al-Falih, who told CNBC last month, in a rather deplorable tone, that Moscow had progressed "more slowly than I would like" Opec Secretary-General Mohammad Barkindo made a statement in which he urged all countries to fulfill their obligations "in full and on time outsourced ".
Russian Energy Minister Alexander Novak reacted quickly by saying earlier this month that Russia "completely fulfilled its obligations in accordance with the plans announced earlier to gradually reduce production by May this year" .
Novak also reportedly said that Russia was speeding up the implementation of its cuts and that "the average level in February should be at least 150,000 barrels lower than in December".
However, it should be noted that Russian production actually increased from October to December and that the reduction from the October baseline was agreed. Russia pledged to reduce its crude output by 230,000 barrels per day from 11,421 million barrels in October to 11.191 billion barrels per day. This goal has been missed by far.
It is interesting to note that Moscow is now committed to achieving its goal until May, one month before the expiry of the current agreement.
What does all this mean for the disposition of the output?
Inquiry points are raised all around the longevity of the agreement. How long would it continue? David Reid writes for CNBC: "the oil pact between Russia and Saudi Arabia, which aims to support prices by reducing production, seems on an unstable ground." Saudi Arabia and its OPEC allies seem to be doing more than meeting their supply reduction commitments. than Russia and its other non-OPEC allies.
Julian Lee writes for Bloomberg: "Saudi Arabia bears a heavier burden in reducing production, while Russia is not living up to the promised cuts. This arrangement can not last. "
Would Riyadh and its allies in Opep continue to make sacrifices at the cost of their market share and if so, for how long? This is a crucial question. It depends a lot. The next meeting of OPEC oil producers and other countries scheduled for mid-April would be interesting in this regard. We must wait and see.
Posted in Dawn, February 24, 2019
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