ABU DHABI, November 11th. / Tass /. OPEC + countries, which increased production over the past five months at the maximum rate, may return to its reduction in the new year. The ministers of oil-producing countries will discuss such a question at an extraordinary monitoring meeting of OPEC + on Sunday. However, the final decision is still far: the next couple of months will show how the sanctions against Iran work, and how the oil supply will affect the price.
The eleventh meeting of the ministerial monitoring committee will be held in the midst of the strongest uncertainty in the oil market in the last two years. On November 5, US sanctions against Iran came into force, the goal of which was to reduce the export of the third largest oil producer to OPEC to zero. At the same time, due to trade wars, a slowdown in economic growth and, consequently, a decrease in demand for oil, is not excluded. And all this will happen against the background of continuing production growth in the United States, which in 2019 may surpass the mark of 12 million barrels per day.
An extraordinary ministerial meeting was set up at the end of September, when the extent of the impact of anti-Iran sanctions on the market was not clear. However, amid falling production in Venezuela, which only lost 380 thousand barrels per day since the beginning of this year, the ban on Iranian exports threatened the market with a deficit. Back in the summer, Saudi Energy Minister Khaled al-Faleh estimated it at over 2 million barrels per day.
However, on Monday, November 5, the US authorities not only imposed sanctions against Iran, but also allowed eight countries to continue to import Iranian oil on a temporary basis. Among them were the largest buyers of its oil – China and India. On the same day, according to TASS, al-Falekh called his Russian counterpart Alexander Novak and suggested that he consider returning to the reduction in 2019.
The next day, Novak, in communicating with journalists, assessed the current state of the market as "well balanced", including due to the fact that the United States retained part of Iranian exports. According to him, it is necessary to assess how the market situation will develop by the end of the year and the beginning of the next.
Live till monday
According to Tatyana Mitrova, Director of the Center for Energy at the Moscow School of Management of Skolkovo, clarity on the question of whether production should be reduced may 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 quotes are falling for a month, and oil has already lost $ 15 in price, dropping below $ 70 a barrel for the first time since April. And, therefore, investors have no concerns about the security of consumers with oil.
Vice-President of Wood Mackenzie on the macromarket Anna-Louise Hittl noted in her comment that Saudi Arabia and Russia have increased enough production since July to compensate for 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 was announced, the supply of Iranian oil to zero, and production will not begin to fall markedly in other countries, the market can survive this winter calmly even in the face of sanctions, she noted.
Before you think about reducing production, Russia and Saudi Arabia would be worth remembering about the observance of the June agreements, recalls Mitrova. Then the OPEC + countries supported the initiative of Moscow and Riyadh to increase production by 1 million barrels per day, just for fear of a shortage. But, despite the fact that the decision was 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, then to stabilize these 500 thousand barrels per day may well be enough – this is exactly the volume by which the June agreements have now been exceeded," she says.
However, another question remains open – how will Russian oil companies react to a new reduction, some of which, against the background of the June decisions, announced ambitious plans for production for the next year. On Thursday, after a meeting with the Minister of Energy of the Russian Federation Alexander Novak on this topic, the oilmen refused to comment on this question to the journalists who were waiting for them.