Baku, Azerbaijan, Oct. 10
By Elena Kosolapova – Trend:
Both OPEC and non-OPEC members are spotting some weaknesses in the strategy to cut oil production, Marco Giuli, an energy issues analyst at the Brussels-based European Policy Center, told Trend on Oct. 10.
In late September, OPEC agreed to cut its oil output for the first time since 2008. The group plans to reduce output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd. How much each country will produce is to be decided at the next formal meeting of OPEC in November, when an invitation to join cuts could also be extended to non-OPEC countries, such as Russia.
Last week Azerbaijan’s Energy Ministry said that one more OPEC informal meeting attended by such non-OPEC members as Russia, Brazil, Kazakhstan, Azerbaijan, Mexico and Oman will take place within the 23rd World Energy Congress in Istanbul on Oct. 12. Consultations regarding the oil production cut will be held at that meeting.
Marco Giuli believes that with more non-OPEC members having to agree to a cut, burden sharing will become increasingly complicated.
The expert noted that even within OPEC, there are not only Iran’s requests to accommodate, but also – and especially – those of Libya and Nigeria, which due to political unrests are producing much below their capacity.
Iran is increasing oil production after international sanctions were lifted from the country and refuses to a freeze or a cut in oil production. Libya and Nigeria also want to increase the production.
“Whatever is the outcome of any agreement, huge upward pressures on prices are unlikely,” Giuli said. “First, inventories are full. Second, US unconventional wells are ready to come back on stream very quickly, should prices go up significantly.”
He reminded that in the US there is no any output quota set by the government.
“Market forces and short time-to-market of tight oil make the US the real swing producer – one that does not, and cannot in any way, become part of coordinated behavior among producers,” the expert said.
According to OPEC’s September forecast, the world oil demand in 2016 will reach 94.27 million barrels per day.
The world oil production in August, according to OPEC data, was 95.65 million barrels per day, 34.7 percent of which came from OPEC countries.