OPEC+ will cut oil production: it's good for Russia

OPEC+ will cut oil production: it's good for Russia

OPEC+ will cut oil production: it's good for Russia

5 October, 13:24
On Wednesday, October 5, at a meeting of OPEC +, a decision may be made to reduce oil production by 1 or even 2 million barrels per day. The fact that such a decision will be announced at the end of the OPEC + ministerial meeting is confidently reported by Bloomberg and Reuters sources.

Yekaterina Maksimova

Experts from the Institute for the Development of Technologies in the Fuel and Energy Complex (IRTTEK) call this decision both significant and insignificant at the same time.

“From the point of view of the supply of physical oil, it will mean absolutely nothing. Production in OPEC countries alone is currently more than 1 million barrels per day behind the permitted quotas, and in general for OPEC + the gap is almost 4 million barrels per day Thus, this decision will have absolutely no effect on the real proposal”, - Dmitry Koptev, head of the IRTTEK media center, commented to NI.

The decision of OPEC+, the expert believes, can be regarded as a signal: oil producers are not ready to be content with the previously announced price range of $60-$70 per barrel of Brent oil, and would like to keep quotes above $90.

The IRTTEC expert notes that the possible OPEC+ decision is beneficial for the two leading oil producers: Russia and Saudi Arabia. “Russia is interested in maintaining high oil prices in anticipation of the introduction of a price cap, which will be calculated based on the real cost, and not speculative quotations from price agencies. For Saudi Arabia, this will allow to keep reserve capacity that may be required if supplies from Russia sharply will fall after the introduction of price restrictions", - Dmitry Koptev explained.

Georgy Vashchenko, Deputy Director of the Analytical Department at Freedom Finance Global, recalls that the European Union and the United States would like to set a ceiling price for Russian oil. And he believes that it is still difficult to predict how today's OPEC + decision will affect the balance of supply and demand in the market in the medium term.

“It was previously expected that only Russia could cut production by the end of the year, but so far there are no objective data confirming this. The EU and the United States are developing a mechanism for setting a ceiling price for Russian oil as part of a new package of restrictions, but secondary sanctions are not planned in this regard "As a result, most likely, there will be no significant shortage of raw materials on the market in winter. We expect that oil in October will be traded in the range of $ 90-100 per barrel of Brent", - the deputy director of the analytical department of Freedom Finance Global predicts (quoted by Finam ).

The OPEC+ ministerial meeting will be held on October 5 in person in Vienna. The decision is made against the backdrop of a decrease in oil prices, which has lasted for more than a month. The reference brand of Brent oil has lost almost 11% in price over the past month alone.

The decision of OPEC + is unfavorable for the US administration. In November, America will hold midterm congressional elections, which are considered a referendum on the performance of the current administration. With a decrease in production quotas, "black gold" will rise in price on the world market. As a result, the price of petrol will also rise. That almost a month before the Congress cannot but disturb US President D. Biden. World experts do not rule out that after the decision of the cartel, the US may allow the release of oil from its strategic reserves.

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