SOCAR talks relevancy of OPEC+ format

Oil&Gas Materials 10 March 2020 14:37 (UTC +04:00)
The OPEC + format has not exhausted itself, despite allegations of inability to reach consensus at the last meeting
SOCAR talks relevancy of OPEC+ format

BAKU, Azerbaijan, Mar. 10

By Nargiz Ismayilova – Trend:

The OPEC + format has not exhausted itself, despite allegations of inability to reach consensus at the last meeting, Ibrahim Ahmadov, deputy head of the public relations and events department at the Azerbaijani State Oil Company SOCAR, told Trend.

"The experts agree that the common goals of the format participants are still relevant - which is the desire to jointly regulate oil markets and avoid a long-term drop in its prices. At the same time, some participants may be favoring a short-term decrease in oil prices," he noted.

"Just like in 2014, today an argument is again being put forward here to put pressure on the market positions of unconventional oil, in particular, shale oil producers since for them the break-even point is higher than for conventional oil producers. If we take this justification as a basis, then most likely we can talk about a temporary price reduction," he noted.

Ahmadov said that SOCAR has not invested in the production of unconventional oil in recent years, and its investments were mainly aimed at the development of oil refining and petrochemical complexes in Azerbaijan and beyond it.

"This helped us balance our business portfolio. Thus, even if there are losses from the crude sale due to lower prices, the margin in oil refining and petrochemicals still is likely to increase, for which we partly buy oil from other companies at a market price," Ibrahimov added.

Thus, over the past decade, SOCAR has done significant work to achieve the stability of operations and reduce the dependence of total profit on one type of product.

“In general, I believe that the OPEC+ format will remain relevant in the future. The issue of joint quotas for restricting oil production in accordance with market demand may be raised again,” he concluded.

OPEC countries recommended an additional reduction in oil production by 1.5 million barrels per day until the end of 2020. However, at the March 6 meeting, the OPEC+ countries failed to agree on either an additional reduction or extension of transactions under current conditions. As a result, on April 1, 2020, the restrictions will expire.

At the VII meeting of the OPEC and OPEC+ ministers (oil exporting countries that are not members of the OPEC organization), on December 6, 2019, a decision was made to reduce OPEC+ oil production by 500,000 barrels per day. In accordance with the new "declaration of cooperation", Azerbaijan’s obligations were increased by 7,000 barrels and determined at the level of 27,000 barrels. Until the end of the first quarter of 2020, Azerbaijan should maintain daily oil production in the amount of 769,000 barrels.