ABU DHABI, 11 November. / Tass /. The OPEC + countries, which have increased production in the last five months at the maximum rate, could return to its reduction in the new year. Ministers from oil-producing countries will discuss this issue at an extraordinary OPEC + monitoring meeting on Sunday. However, the final decision is still far-off: the next two months will show how sanctions against Iran work and how the oil supply will affect the price.
The eleventh meeting of the ministerial monitoring committee will take place amid the strongest uncertainty in the oil market in the last two years. On 5 November, US sanctions against Iran entered into force, the aim of which was to reduce exports of the third largest oil producer to OPEC to zero. At the same time, due to the trade wars, a slowdown in economic growth and, consequently, a reduction in the demand for oil is not excluded. And all this will happen against the background of the continued growth of production in the United States, which in 2019 could exceed the limit of 12 million barrels per day.
An extraordinary ministerial meeting was established at the end of September, when the impact of anti-Iran sanctions on the market was not clear. However, due to the fall in production in Venezuela, which lost only 380,000 barrels a day from the start of this year, the ban on Iranian exports has threatened the market with a deficit. Back in the summer, Saudi energy minister Khaled al-Faleh estimated it at over 2 million barrels a day.
However, Monday, November 5, the US authorities not only imposed sanctions against Iran, but also allowed eight countries to continue importing Iranian oil on a temporary basis. Among these were the largest buyers of its oil: China and India. On the same day, according to the incident, al-Falekh called his Russian counterpart Alexander Novak and suggested he consider the return to the reduction in 2019.
The next day, Novak, in communicating with journalists, assessed the current state of the market as "well balanced", partly because of the fact that the United States has kept part of Iranian exports. According to him, it is necessary to evaluate how the market situation will develop by the end of the year and the beginning of the next.
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According to Tatyana Mitrova, director of the Energy Center at the Skolkovo School of Management in Moscow, clarity on the question of whether production should be reduced could come not earlier than January or even later. The key factors for this are the growth rates of the world economy, the severity of anti-Iran sanctions and the growth rate of shale oil production in the United States.
Finam analyst Alexei Kalachev pays attention to the fact that the market reacts calmly to sanctions against Iran – Brent prices have been falling for a month, and oil has already lost $ 15 in price, falling below $ 70 a barrel for the first time since April. And, therefore, investors do not care about the safety of consumers with oil.
Wood Mackenzie vice-president on macromarket Anna-Louise Hittl noted in his comment that Saudi Arabia and Russia increased production from July to offset the Iranian barrels that left the market. According to WoodMac, Iran has lost about 1 million barrels of exports per day from sanctions – from 2.8 million to 1.8 million barrels per day. And, if the sanctions are not reduced, as announced, the supply of Iranian oil to zero, and production will not begin to decline significantly in other countries, the market can safely survive this winter despite sanctions, he noted.
Before thinking about reducing production, Russia and Saudi Arabia would be worth remembering the observance of the June agreements, recalls Mitrova. Then the OPEC + countries have supported the initiative of Moscow and Riyadh to increase the production of 1 million barrels a day, only for fear of a shortage. But, despite the decision being general, only Saudi Arabia, Russia and the United Arab Emirates were recovering production. Since then, the June decision has been exceeded by 0.5 million barrels, the expert said.
"If prices continue to fall by the end of the year, it may be enough to stabilize these 500,000 barrels a day – this is exactly the volume by which the June agreements have been exceeded," he says.
However, another question remains open: how will the Russian oil companies react to a new reduction, some of which, in the context of the June decisions, have announced ambitious plans for production for next year. Thursday, after a meeting with the Minister of Energy of the Russian Federation Alexander Novak on this subject, the oilmen refused to comment on this question to the journalists who were waiting for them.