Take a million from OPEC

The cartel promises to cut production to increase oil prices

The Organization of Petroleum Exporting Countries will reduce production by 1 million barrels per day. This decision will be officially announced at the extraordinary OPEC conference, which began yesterday evening in the Qatari capital Doha. The main reason is the prolonged fall in oil prices, as a result of which its price has already fallen by $20 since August of this year. According to Western media reports from Qatar, the proposal to reduce production is supported by all 11 member countries of the cartel. Such unanimity on the issue of reducing quotas has not been observed for more than two years. The OPEC decision is expected to come into force on November 1.

Nevertheless, the intrigue of the conference remains - after all, the question of what, in fact, will be reduced has not yet been resolved: real production (currently 27.5 million barrels per day) or production quotas (28 million barrels per day) . The quota was adopted in July last year, when the cost of a barrel exceeded $55 for the first time. OPEC ministers called these prices “real madness” and, trying to smooth out the growth, proposed increasing quotas by 500 thousand barrels per day, which, according to many analysts, led to would bring production for most OPEC countries to the maximum level. The official quota did not change during the year. However, against the background of constantly rising oil prices, some countries included in the cartel, in particular Saudi Arabia, Kuwait, Libya and Algeria, began to independently increase production. Other countries, including Indonesia, Nigeria, Venezuela and Iran, with less potential, kept oil production at or slightly below established quotas. As a result, at the peak of rising oil prices, real production by exporting countries reached almost 30 million barrels per day. But in September, as oil prices began to fall, some cartel members began to slowly reduce production. Officially, Nigeria and Venezuela were the first to announce a reduction in production by 5 and 1.5% at the end of September, working at the limit of their capabilities during the growth of the oil market. Later, the initiative was supported by Saudi Arabia, Kuwait, Iran and the United Arab Emirates.

The final decision on the mechanism for reducing production is expected to be made at a meeting of OPEC oil ministers, which will be held this evening. "The minimum outcome will be that we announce one million barrels. The main question is how this will be distributed. We need to discuss the details," OPEC President and Nigerian Energy Minister Edmund Daukorou told Reuters ahead of the meeting. In an interview with Dow Jones, Mr. Daukoru noted that Nigeria produces slightly less than expected, so he personally does not see much difference in the issue of reduction mechanisms. Iran also takes a neutral position. “Iran will support any decision by OPEC,” assured the country’s representative in the cartel, Kazem Vaziri Khamaneh, although the day before he advocated reducing quotas. Kuwait also supports the option of reducing production by lowering quotas. But according to Western media, countries such as Saudi Arabia, Venezuela, Algeria and Libya are behind the decline in real production. The United Arab Emirates, Kuwait, Indonesia, Qatar and Iraq (whose production is not yet officially included in the quota) have not yet expressed an official opinion.

Most likely, Western experts note, a decision on the reduction mechanism will not be made today. OPEC countries could declare a reduction of a million in order to stabilize the price situation, and then see where the market moves. Against the backdrop of promising statements from OPEC, oil prices began to rise slightly. In New York, November futures quotes rose to $58.05 per barrel, and on the London exchange the Brent price reached $60 per barrel. However, analysts are confident that this impulse will not last long, since the mechanism for controlling the oil market in the form of a simple increase or decrease in supplies has long been outdated.

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Export duties on oil in Russia from December 1 may decrease by more than $50 per ton. This was announced by the Deputy Head of the Customs Payments Department of the Ministry of Finance, Alexander Sakovich: “It all depends on the remaining nine days of monitoring - if the oil price remains at the level it is at now, then the duty may be reduced by 56-57 dollars per ton ". From October 1, the duty on oil is 237.6 dollars per ton, on light oil products - 172.4, on dark oil products - about 92.9 dollars per ton. AK&M

Anna GORSHKOVA