By Rhod Mackenzie
The Joint Ministerial Monitoring Committee confirmed all countries compliance with the agreement of the OPEC+ countries to reduce oil production until the end of 2024. On the eve of the next meeting, industry analysts did not expect new recommendations to the participants in the transaction. The decision of Russia and Saudi Arabia to extend the voluntary reduction of exports and production to September added to the confidence that the parameters will be maintained. At the same time, the corridor of quotations of $80-100 per barrel seems to be optimal for producers, and the parties to the agreement will strive to adhere to it, experts believe. OPEC + does not make sense to make any hasty decisions, it is worth continuing monitoring and waiting until autumn, they say .
Flight is normal
The OPEC+ Ministerial Monitoring Committee (JMMC) held a regular meeting at which it discussed the situation on the oil market and the parameters of an agreement to limit production . By tradition, the committee itself does not make decisions, but only makes recommendations on changing the parameters of the transaction . The result of the online meeting was the decision to keep the agreement in its current form.
“The Committee reaffirmed the commitment of the member countries to the declaration of cooperation, which will last until the end of 2024, as agreed at the 35th Ministerial Meeting of OPEC and non-OPEC countries ... on June 4, 2023,” the alliance said in a statement.
Lets recall that as part of its deal, OPEC + reduces oil production by 2 million barrels per day until the end of 2023. At the last ministerial meeting in June, the alliance announced that it would reduce oil production by about 1.4 million barrels per day from 2024.
“We also agreed that we will closely monitor the situation, since the state of the world market today largely depends on the uncertainties that we are seeing, economic recovery, high interest rates in many countries, high inflation levels . All this must be closely monitored to see how it will affect consumption and the investment attractiveness of the oil industry,” said Deputy Prime Minister Alexander Novak.
In its decisions, OPEC + proceeds from the maximum possible objective assessment of the level of supply and demand , said Alexander Frolov, Deputy Director General of the National Energy Institute. According to him, supply in the first half of the year exceeded demand, which had a negative impact on prices .
— Then Russia, Saudi Arabia and other parties to the agreement further reduced production and supplies to the world market. This decision, judging by the price level, turned out to be extremely correct. For the current and future tasks of the oil and gas industry, it is desirable that oil cost between $80–95 per barrel . As we can see, it has returned to this corridor, which indirectly confirms the absence of not only a surplus, but also a shortage on the world market, the threat of which the representatives of the United States and the European Union are trying to talk about , - notes the interlocutor of Izvestia.
The Deputy Prime Minister Alexander Novak said on August 3 that "as part of an effort to balance the market, Russia will continue to voluntarily cut supplies to oil markets in September, now by 300,000 barrels per day, through export cuts by the designated amount ." At the same time, it became known that Saudi Arabia is extending to September a voluntary cut in oil production by 1 million barrels per day, which began in July.
As reported by the Saudi news agency SPA, the reduction in production may be extended or increased in the future. In fact, the kingdom's production in September will be about 9 million barrels per day . “The source confirmed that this additional voluntary cut is intended to reinforce the precautionary measures taken by the OPEC+ countries in order to maintain stability and balance in the oil markets ,” they concluded.
— The decision of the OPEC+ Monitoring Committee indicates at least two things. Firstly, during the years of this agreement, the producing countries have managed to establish a balance of supply and demand at the level they need . Today, oil prices can be said to be ideal for them. On the one hand, they are not as high as they were 15 years ago, when they were close to $150 per barrel at their maximum. The repetition of such a scenario would threaten to reduce oil consumption and even greater orientation of Western countries to alternative energy sources , - said Valery Andrianov, associate professor at the Financial University under the Government of the Russian Federation, expert at the InfoTEK analytical center.
Let's wait until autumn
The stability of decisions taken at OPEC+ meetings demonstrates the absence of fundamental disagreements and the unity of approaches of the participating countries in terms of the need to reduce surpluses of crude oil on world markets, says Ph.D., General Director of Independent Analytical Agency of the Oil and Gas Sector, Associate Professor RANEPA under the President of the Russian Federation Tamara Safonova.
“ Responsible execution by OPEC+ countries of the decisions made has an impact on international exchange traders, being a guarantor of the stability of the world supply and a factor in reducing the risk of high volatility when trading derivative financial instruments ,” the expert noted. According to her, a balanced policy of reducing global supply can make the economies of oil and gas producing countries more stable, provided that world oil prices in the “premium segment” are maintained at $80 per barrel and above .
“ Oil is a strategically important resource for the world's energy supply , and after the world is divided, it no longer makes sense to support the economies of unfriendly countries by offering resources at niche prices ,” she added.
According to Valery Andrianov, the economies of Western countries are still in a state close to recession, which negatively affects the potential for demand and growth in oil prices .
Therefore, there is no reason for OPEC + to make any hasty decisions, it makes sense to continue monitoring and wait until autumn , he concluded.
This article originally appeared in Russian at iz.ru