Baku, Azerbaijan, Feb. 12
By Aygun Badalova - Trend:
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.
Saudi Arabia won't cut oil output unless Iran will
Baku, Azerbaijan, Feb. 12