Baku, Azerbaijan, Jan. 29
By Aygun Badalova - Trend:
A possible rapprochement between Russia and OPEC could be an option, only if Russia is willing to lower its overall production unilaterally, Cyril Widdershoven, Middle East geopolitical specialist and energy analyst told Trend.
The Gulf Cooperation Council leading by Saudi Arabia will not comply with agreed production cuts, Widdershoven believes.
Russian Energy Minister Alexander Novak confirmed Russia's readiness to meet with producers to discuss oil production.
He said that the topic of discussion at the planned OPEC meeting in February with representatives of other oil-producing countries could be the question of oil production reducing for each producer country at the level of five percent, but a general agreement is needed for it.
With regard to the possibility of OPEC's cooperation with other non-cartel countries, Widdershoven believes that strategic and geopolitical-economical issues are the obstacle.
"The main question is why should OPEC cooperate with the non-OPEC producers, as this will only mean that both sides will need to cut production in the end," Widdershoven said.
For OPEC, he said, this is a struggle for survival, as oil and gas production is the main source of revenue for cartel member governments.
"It will also be much more difficult to coordinate with non-OPEC as most of this oil is in the hand of IOCs and independents," he said, adding that they are not able to agree on market cooperation, as this will be blocked by anti-cartel laws in the US-Canada and the EU, and some international organizations as well.
Earlier this week OPEC Secretary-General Abdullah al-Badri called for cooperation between OPEC and non-cartel countries in order to jointly address the issue of the stock overhang.
"Once this overhang starts falling then prices start to rise. Given how this developed, it should be viewed as something OPEC and non-OPEC tackle together," al-Badri said.
In the issue of the cooperation between OPEC and non-OPEC countries the current position of Iraq and Iran is not being taken into consideration, Widdershoven said.
"Iraq is OPEC, but doesn't fall under OPEC production quota yet, so they are producing as much as they can," he said.
"Iran wants to increase its oil production volumes, but is not able to, due to remaining sanctions and its position within OPEC," he added.
Market is in flux but there are no real options to change it, Widdershoven believes.
"OPEC will keep to production quota to get market share and stabilize market, non-OPEC will have to slow down and close large volume of production due to costs and extreme high financing levels," Widdershoven said.
In its recent summit on December 4, the OPEC failed to put a new ceiling to its output. The cartel members produced 32.182 million barrels per day in December, including some 693,000 barrels per day, produced by new member, Indonesia.
The US Energy Information Administration (EIA) forecasts the supplies from OPEC countries will increase up to 39.16 million barrels per day in 2016 and up to 40.01 million barrels per day in 2017.
The supplies from the countries-non-OPEC members are expected to reduce up to 56.77 million barrels per day in 2016 and up to 56.68 million barrels per day in 2017.