Baku, Azerbaijan, Feb. 2
By Elena Kosolapova - Trend:
It will be difficult to come to any agreement regarding the level of production for the OPEC and other oil producers who are not members of the cartel, founder and director general of the National Energy Security Fund of Russia Konstantin Simonov told Trend.
"Countries violate their obligations even within the OPEC," said Simonov. "They are constantly caught on the fraud: their real production level is completely different from the declared one. There are cases of fraud with tankers, illegal shipment... If the OPEC is not manageable, how can one say that the cartel will coordinate efforts with other producers?"
This week, OPEC urged the non-cartel countries to jointly solve the problem of oil excess on the market. On Jan. 28, Russian Energy Minister Alexander Novak said that in February, OPEC plans to hold a meeting with participation of the non-cartel oil producing countries, and Russia is ready to participate.
Simonov said that it is also not clear how much one needs to reduce production in order to balance the market. In addition, Simonov said that not all oil-producing countries are willing to reduce production.
For example, Iran believes that all countries should reduce production, except for itself, because Tehran has suffered due to the sanctions and must now receive retroactive bonuses for previous historical periods, the expert said.
The expert went on to add that, for example, Norway has already stated it is not going to cut production.
The US, which may join the three largest oil producers on the results of 2015 along with Saudi Arabia and Russia, will also notenter an agreement on the level of oil production, according to Simonov.
Total oil production, including shale, was 9.43 million barrels per day in 2015, according to the US Energy Information Administration (EIA).
As for the possibility of reducing production by Russia, Simonov said that it could fall by 1.5-2 percent in 2016, not due to the conclusion of any agreements with OPEC, but because of the ongoing fiscal policy and reduction of the investment volume.
There are no guarantees that reducing oil production will lead to higher prices, he added.
"The main question as of now is: are we sure that just the volume of oil supply is the factor, which heavily affects the oil prices?" said Simonov.
He considers that the explanation of overproduction for the current decline in oil prices is highly dubious.
"Explain then, why the prices declined by 40 percent in January of last year? What happened? It is explained with slowdown in China's growth. It had slowed down long ago, but it is growth, thus the demand for oil increases," said the expert.
"So what happened in the markets? Iran? It didn't increase production and exports according to the results of 2015," he added.
According to the International Monetary Fund (IMF), Brent oil price hit $47.54 per barrel in January 2015.
The expert said that Saudi Arabia does not believe that it is possible to restore the previous prices by reducing the production.
"Saudi Arabia has already done this in the 1980s," Simonov said. "It has reduced the production by more than 300 million tons for five years, but the price has not really changed. Since then, the Saudis have been always striving to earn through this volume."
He said that even at a price of $30-40 per barrel, Saudi Arabia continued earning through big production volumes and a low prime cost of oil. According to the various estimates, the prime cost of oil hits from $2 to $12 per barrel in Saudi Arabia.
"I have great doubts that by reducing the oil supply, we will achieve an increase in prices," he said. "The monetary factor, the dollar exchange rate and the policy of the US Federal Reserve System affect the oil. Unfortunately, oil producers can do nothing with these factors."
The global consumption of liquid hydrocarbons amounted to 93.77 million bpd in 2015, the US Energy Information Administration (EIA) said.
The EIA predicts an increase in global consumption up to 95.19 million bpd and 96.61 million bpd in 2016 and 2017, accordingly.
According to the EIA, the global supply of liquid hydrocarbons amounted to 95.71 million bpd in 2015. The EIA predicts the growth of the global oil supplies up to 95.94 and 96.69 million bpd in 2016 and 2017, respectively.
Brent oil price (March futures) reduced by 2.04 percent up to $33.54 per barrel Feb. 2.