Yesterday in St.-Petersburg became the meeting place of the monitoring group “OPEC+”, discussing the half-yearly results of the action and further agreement to reduce production of “black gold”, signed on 24 exporting countries at the end of last year. Despite the fact that the agreement as a whole performed for the market it was not enough: the price of oil remained low and threatens to fall even more.
The format of the St. Petersburg meeting, which brought together a number of energy Ministers from countries that have signed the agreement in November-December 2016, did not expect any final decisions. The participants only had meetings about how the transaction is carried out. However, the value of the summit should not be underestimated: it took place amid serious concerns of the Organization of countries — exporters of oil (OPEC) that the agreement stopped working.
Recall that the transaction was intended to cut global oil production by almost 1.8 million barrels per day (of which 300 thousand are in Russia). This is required to reduce excess supply in the market, which puts pressure on the prices for three consecutive years and caused an economic shock in the oil-producing countries.
As stated in St. Petersburg, Russian energy Minister Alexander Novak, the level of implementation of the agreement on production cuts in six months is close to 100% and the countries participating in joint efforts to remove from the market more than 350 million barrels of oil. That’s just the price it’s not much help.
Initially the market perceived the agreement as “OPEC” with enthusiasm, and the barrel pretty quickly rose from $45 to $55. But in the last couple of months there was a “rollback” — despite the fact that all participants in the transaction in late may agreed to roll over for another 9 months before the end of March 2018.
Currently a barrel is around $48 and can not overcome even a very modest $50. It is clear that to further support oil prices, the market requires some new steps. In their search was the main intrigue of the St. Petersburg meeting of the monitoring group.
For this, according to the influential publication The Wall Street Journal, even prematurely ended his vacation, Khaled al-falih, the Minister of energy of Saudi Arabia, leader of OPEC production. State Minister newspaper described as “very nervous”, saying that yesterday he spent an intense phone consultation with my colleagues in OPEC. And immediately upon his arrival to Russia, the Saudi Minister hastened to talks with Alexander Novak. It is al-falih and Novak presided at the St. Petersburg meeting, one of the main themes of which was the inclusion in the deal lower production in Libya and Nigeria. Both the state member of OPEC, previously exempted from participation in the current agreement (due to previous losses as a result of hostilities and natural disasters), has recently increased oil production. Judging by the sounded statements Petersburg, Libya and Nigeria ready to join the agreement once reached stable levels of oil production.
In addition, the participants discussed how they apply to oil shale extraction, USA, which remains outside the control of OPEC. Producers of shale oil quickly took advantage of the situation and increased production when oil prices last year rose after the OPEC agreement. Warns Bloomberg, oil production in the US in 2017 could increase by 800 thousand barrels per day, making meaningless efforts of OPEC and its partners to stabilize prices on “black gold” in the range of $50-60 per barrel. At the same time, judging by the statements made in the St. Petersburg statements, the possibility of U.S. accession to the General agreement still is not considered.
Finally, one of the main results of recent St. Petersburg meeting: the Committee recommended that, if necessary, extend the agreement beyond March 2018 — at least until the end of the first half of the coming year.
As for the impact of the St. Petersburg meeting of the current price of oil, Anna Bodrov, senior analyst “Alpari”, does not expect that the barrel will move strongly in one direction or another from its current level of $48. The expert recalled that at the end of last week, the market has experienced three “bull” attack to “throw” the price to $50 a barrel, but these were not successful.
The next meeting of the technical Committee on monitoring of transactions to reduce oil production (OPEC+) will be held on August 21, said the Minister of oil of Kuwait Essam al-marzouk.