Russia started talking about cutting production by 5%. Even if freezing will be solved only by Russia, the oversupply on the world market will decline by about a third. If we manage to agree on the reduction at the global level, not only will eliminate the excess, but will appear deficit. In result, oil prices can dramatically go up.
Russian authorities have agreed on the possibility of reducing the level of oil with Russian companies, said Deputy energy Minister Kirill Molodtsov at the conference “Global and local markets of oil and oil products”.
“The possibility of regulating the volume of production in minimum range of minus 5% is a realistic measure of the impact on the market,” the official said.
However, later on Thursday, Molodtsov said that there is no binding instrument for the reduction of no. “Agreed — it is so signed, and this was not” — said the Deputy Minister.
The statement about the possible reduction of production was made against the background of preparations for the International energy forum, to be held in the beginning of next week in Algeria. During the forum, in particular, it is planned to discuss joint actions of the oil producers to stabilize the oil market. However, in this case we are not talking about production cuts.
“The question of the reduction — producing countries oil production now is not discussed”, — said on Thursday the head of Ministry Alexander Novak.
The Secretary General of the Organization of countries — exporters of oil Mohammed Barkindo two days earlier, said that may be an agreement to freeze production for one year. The day before Venezuelan President Nicolas Maduro said that the producers are close to concluding agreements to freeze.
Interestingly, the decrease in production of 5% is raised in January, that is before Russia, Venezuela and Saudi Arabia for the first time talking about the freezing of the production level (when the negotiations failed, and in April he rejected the idea completely, as Iran refused to capture prey). As told sources “Газеты.Ru” in January with a proposal to reduce production to Russia appealed to the Saudis. Russia at that time was producing 10.1 million barrels per day.
At the present time Russia reached the peak of oil production. The same young Men on Wednesday, said in September reached a historical high of 11.75 million barrels per day. And the company, judging by their actions, while reducing the production not going. So, on Wednesday, was commissioned Vostochno-Messoyakhskoye field (shareholders of the project on an equal footing are “Gazprom Neft” and “Rosneft”), the estimated peak production which must be achieved by 2020 and will amount to 5.6 million tons (about 112 thousand barrels per day). A month later Rosneft is preparing to introduce the suzunskoe field, which has already this year to give 1.2 million tons of oil (peak production should reach 4.5 million tonnes).
The largest Russian oil company “Rosneft” and “LUKOIL” the idea of reducing the production refused to comment.
To reduce the level of production alone does not make sense, since in this case the state, to reduce production, lose market share. The head of the energy development Fund Sergey Pikin says that if all major producers agreed to cut production by 5%, this would give a strong impetus to the barrel.
“The excess supply in the global market now exceeds 1.5 million barrels per day, whereas a reduction of 5% would be removed from the market about 4.5 million barrels a day,” explains the expert.
But Pikin believes that countries will be able to agree not only on reducing but also on the freezing. The head of FER resembles that of the current peaks of production in Russia is the result of investments made in “rich” years, when the price per barrel was much higher (oil prices started to fall since mid-2014, then quotes were at around $110 per barrel. — “Газета.Ru”).
“For Russian companies it makes no sense to devalue your own investment, reducing production. In addition, in Russia to do it technically more difficult than, for example, in Saudi Arabia,” — says the expert.
The Saudis, by the way, earlier also said that to cut production did not intend. According to OPEC, Saudi Arabia (SA) since the beginning of the year, by contrast, consistently increasing production. If in the first quarter they amounted to 10,14 million barrels per day in August, the CA has already produced 10.6 million barrels. The situation is similar to Iraq and Iran (the second and third place in OPEC production). Iraq in the first quarter was produced 4.23 million barrels, and in August of 4.35 million barrels per day. The Islamic Republic of Iran to 3.09 million and 3.65 million barrels, respectively.
Pikin believes that all the talk about the reduction and freeze will remain on the level of conversation. Earlier, market experts have repeatedly said that the plans to stabilise the market are nothing more than verbal intervention designed to maintain quotes.
On Thursday at the Intercontinental exchange ICE in London, November futures for Brent crude rose by 1.7%, to $of 47.64.
