Abu Deby, November 11. The Tass. The OPEC + countries, which have increased production in the past five months at the maximum rate, may return to the new year. Ministers of the oil-producing countries will discuss such a question at an extraordinary monitoring session of the OPEC + on Sunday. However, the final decision is still far: the coming months will see how the sanctions against Iran are working, and how the supply of oil will affect the price.
The 11th meeting of the Ministerial Follow-up Committee will be held at the height of the strong uncertainty in the oil market in the past two years. On November 5, US sanctions against Iran, aimed at reducing the export of OPEC's third largest oil producer to zero, came into effect, however, due to trade wars, a slowdown in economic growth and, consequently, a drop in demand for oil is not included. Against the background of continued growth in production in the United States, which in 2019 may exceed the mark of 12 million barrels per day.
At the end of September was established an extraordinary ministerial meeting, in which it was unclear the scope of the impact of sanctions against Iran on the market. However, among the reduction in production in Venezuela, which only lost 380,000 barrels per day from the beginning of the year, the ban on Iranian exports threatened the market with a deficit. Last summer Saudi Energy Minister Al-Falah estimated more than 2 million barrels a day.
However, on Monday, November 5, the US authorities not only imposed sanctions on Iran but also allowed eight countries to continue importing Iranian oil temporarily, including the largest buyers of its oil – China and India. According to TASS, Al-Falah called his Russian counterpart Alexander Novak and suggested that he consider returning to the 2019 reduction.
The next day, Novak, in the media with journalists, assessed the current situation of the market as "balanced", including due to the fact that the United States kept 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.
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According to Tatiana Mitrova, director of the Energy Center at the Moscow School of Management Skolkovo, clarity on the question whether production should be reduced may come not before January, or even later. The main factors are the growth rates of the global economy, the severity of the sanctions against Iran, and the growth rate of oil shale production in the United States.
Analyst Alexei Klatch, a Pinnam analyst, noted that the market is reacting calmly to sanctions against Iran – Brent's quotations have been down for a month, and oil has already lost $ 15 a price, below $ 70 a barrel for the first time since April. Therefore, investors have no concerns about the security of consumers with oil.
Wood Mackenzie's Vice President for Macro-Market Anna-Louise Hittel noted in her comment that Saudi Arabia and Russia had increased enough production since July to compensate for the Iranian barrels that left the market. According to Woodmak, Iran lost about 1 million barrels of export on a day of sanctions – from 2.8 million to 1.8 million barrels a day. And if the sanctions are not reduced, as declared, the supply of Iranian oil to zero, and the production will not begin to decline significantly in other countries, the market can survive this winter peacefully even in the face of sanctions, she noted.
Before you think about reducing production, Russia and Saudi Arabia will be worth remembering about keeping the June agreements, recalls Mitrova. So OPEC + countries supported the initiative of Moscow and Riyadh to increase production of 1 million barrels per day, just for fear of shortages. But although the decision was general, only Saudi Arabia, Russia and the United Arab Emirates recovered. Since then, the June decision has been exceeded at 0.5 million barrels, the expert said.
"If prices continue to fall until the end of the year, then to stabilize the 500,000 barrels per day it could be enough – this is exactly the volume at which June agreements have now exceeded," she says.
However, another open question remains – how Russian oil companies will respond to a new reduction, some of which, in light of the June decisions, announced ambitious production plans next year. On Thursday, after meeting with Energy Minister of the Russian Federation Alexander Novak on this issue, the oilers refused to comment on this question to journalists waiting for them.