Saudis not to cut oil output unless Iran will
The possibility of a coordinated production cut between OPEC and
non-OPEC members is extremely low, Emma Richards, an oil and gas
analyst with BMI Research, which is a part of Fitch Group,
believes.
“OPEC's current policy is to allow the lower price to clear the
market of the higher cost barrels. That policy's just beginning to
bear fruit, so a cut at this stage would be counter-productive,”
Richards told Trend.
Meanwhile, earlier Reuters reported citing the sources familiar
with the discussions that some OPEC countries are trying to achieve
a consensus among the group and key non-members for an oil
production "freeze".
The proposal of a production "freeze" at current levels was floated
by Venezuelan Oil Minister Eulogio Del Pino during his tour of
producing countries this month which included Russia, Iran, Qatar
and Saudi Arabia.
Last week Saudi Arabia's oil minister Ali al-Naimi talked about
cooperation between OPEC members and other oil producers to
stabilize the global oil market with his Venezuelan counterpart,
but there was no agreement to hold an early meeting of
suppliers.
With regard to the cooperation between OPEC and Russia in
particular, on the production cut, Richards said that it is not in
the interests of the Russian companies to cut the production.
OPEC and Russia have agreed to production cuts at several points
over the past few decades and Russia's history of compliance with
those cuts has been poor, Richards mentioned.
“Given the increasing role of the private sector, it's unclear how
a production cut in Russia would be coordinated. The benefits would
also be mixed - the devaluation of the rouble gives a strong
incentive for companies to raise their investments (where the cost
is in roubles) and increase their exports (where the revenues are
in US dollars). Added to that, the tax burden in Russia is
significantly lower at this price level,” Richards said.
From OPEC's side, the main stumbling block would be Iran, Richards
believes.
“Given how much relations have deteriorated between the two, Saudi
Arabia wouldn't be willing to cut unless there was a cut from Iran
also,” Richards said.
“As the sanctions on Iran have just been lifted, it's unrealistic
to expect them to pull back on production now,” she added.
Free of sanctions, the country plans to increase its oil export by
500,000 barrels per day (bpd), and then raise the figure by another
500,000 to two million bpd within a six month period at the next
step.
Iran's oil production surpassed 2.9 million bpd in January for
first time since August 2012, a month after imposing western
sanctions on Iran. According to OPEC's monthly report, Iran
produced 2.925 million bpd in January 2016, about 38,000 barrels
more than in the previous months.
Cartel's 13 members produced 32.335 mbpd in January, about 130,700
bpd more than December 2015. The official quota for OPEC oil
production stand at 30 million barrels per day.
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