BAKU, Azerbaijan, March 16
By Leman Zeynalova – Trend:
The Saudis’ apparent price war is a risky strategy that may take months to play out, Will Scargill, Managing Oil & Gas Analyst at GlobalData, a leading data and analytics company, said, Trend reports.
“In reality, the brunt of the previous OPEC+ production cuts were borne by OPEC members and Saudi Arabia more specifically, with Russia not implementing significant cuts. It appears unlikely that it will allow itself to be forced into them now in response to the reduced demand caused by coronavirus.
“The effect of the price drop will certainly be seen on US shale producers in the coming months. In Russia, taxes on oil producers automatically adjust to price and shield margins, so the effects will mainly be felt by the state, which has a longer time horizon. If Saudi Arabia was hoping to force Russia back to the fold on production cuts it may be left disappointed. Given the evidence of recovery of US shale since the last price crash, it may also gain little from the strategy in the longer term if it persists.”
Saudi Aramco has received a directive from the Ministry of Energy to increase its maximum sustainable capacity (MSC) from 12 million barrels per day (MMBD) to 13 MMBD.
The 178th (Extraordinary) Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC), held in Vienna, Austria, on 5 March 2020, decided to recommend to the 8th OPEC and non-OPEC Ministerial Meeting to extend the adjustment levels agreed at the 177th Meeting of the Conference and the 7th OPEC and non-OPEC Ministerial Meeting for the remainder of the year. It also agreed to recommend to the 8th OPEC and non-OPEC Ministerial Meeting a further adjustment of 1.5 mb/d until 30 June 2020 to be applied pro-rata between OPEC (1.0 mb/d) and non-OPEC producing countries (0.5 mb/d) participating in the Declaration of Cooperation.
However, during the meeting held March 6, OPEC+ failed to reach any agreement on extension of the deal or deepening the cuts further, which led to a significant decline in oil prices.
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