Verified quotas

OPEC is not going to reduce production despite falling demand

At the session of the Organization of Petroleum Exporting Countries (OPEC) held in Vienna on Wednesday, the cartel ministers decided not to reduce the current quotas for raw material production, maintaining them at the level of 28 million barrels per day. As a result, oil prices on the New York stock exchange fell below $60 per barrel. The situation was also influenced by the information that appeared on Wednesday about oil reserves in the United States, which increased by 6.8 million over the week, to 335.1 million barrels. But even this could not lower the quotes for long. Already yesterday, a barrel of raw materials rose in price again and cost $60.39. The main support for the market is provided by psychological factors: bidders fear a reduction in supplies from Iran, and the tense situation does not allow prices to drop significantly.

According to OPEC forecasts, seasonal demand for oil in the world in the second quarter should decrease by 2 million barrels per day. However, on the eve of the conference, the head of the cartel, the Nigerian Minister of Oil Edmund Daukoru, noted that the reduction in supplies from Nigeria (500 thousand barrels per day out of 2 million barrels produced in the country) and the uncertainty around Iran “have already done their job” and OPEC now has no the need to reduce the production of raw materials. Only two countries spoke in favor of reducing quotas by 0.5-1 million barrels per day - Iran and Venezuela, but their position did not find support.

Mr. Daukorou stressed that the cartel countries are concerned about the persistence of world oil prices over recent months at levels above $60 per barrel. The cartel is interested in preventing an uncontrolled increase in the cost of raw materials, the Nigerian minister noted.

Indeed, if the world economy is still able to consume expensive oil, then in the event of a further rise in energy prices, demand may fall, and after it, prices. However, although the cartel is ready to contribute to some reduction in quotes, it is not able to radically change the situation. In particular, as Kuwaiti Oil Minister Sheikh Ahmed Fahd al-Sabah noted, if in the spring and summer the cost of raw materials drops below $60 per barrel under the influence of reduced demand, then in the fourth quarter it will inevitably creep up again. He believes that political instability in the world and extremism add from 5 to 8 dollars to the cost of each barrel.

Conflicting information coming from Iran continues to agitate the markets. For example, on Wednesday morning, Deputy Secretary of Iran's Supreme National Security Council Javad Vaidi said that Iran will be forced to reconsider its oil export policy if pressure on it from the international community increases. However, a little later, the country's Minister of Oil Industry Kazim Vaziri assured that the country does not intend to reduce the volume of supplies to world markets.

According to the head of OPEC, the cartel intends to “continuously monitor the market and make decisions depending on the development of the situation there.” “We need to know more about demand in the spring-summer period, when the need for oil in importing countries traditionally falls,” the minister added. Previously, he did not rule out that representatives of the cartel countries would meet earlier than June 1, when the next session is scheduled to be held in Qatar, but on Wednesday there were no reports of planned extraordinary meetings. At the same time, as an operational instrument of influence on the market, Kuwait proposed returning to the so-called price corridor system (if prices exceed the established maximum or minimum level, the cartel automatically increases or correspondingly reduces production by 500 thousand barrels per day), but no official decisions have been made yet. this bill was not accepted.

Denis REBROV