Weekly economic review (May 22-26)

Natig Aliyev: Current oil prices acceptable for Azerbaijan

Azerbaijan will support the proposal to prolong the agreement on reducing oil output between OPEC and non-OPEC countries, said Azerbaijan’s Energy Minister Natig Aliyev in his interview with the Caspian Energy magazine.

According to him, the Vienna agreement, signed in November 2016, was the first important joint agreement reached throughout the whole history of OPEC and non-OPEC states.

“The second significant advantage of this meeting was the determination of the method and mechanism of influencing the market by means of consecutive and agreed reduction of oil production. Monitoring and technical committees were established to study and control the market situation. They have already held two sessions this year. They gave positive conclusions about the fulfillment of these agreements and about the influence of undertaken obligations on the market. Thanks to it, the oil price remained practically stable within $50-55 per barrel starting from January,” noted the minister.

He said also that the current oil prices are acceptable for Azerbaijan.

“It is rather acceptable for Azerbaijan. Price stability and predictability is of great importance to us. We are the country which is certainly dependent on oil price at the world oil market as it is included into the calculation when setting the budget revenues. As you know, this year we have taken $40 as the basis. If the price stays at $50, it means that we are going to have a budget surplus during five months. It is rather a positive factor for our economy and is certainly of great importance,” he noted.

Aliyev also spoke about his expectations from the probable prolongation of the agreement.

“Minister of Energy, Industry, and Mineral Resources of Saudi Arabia Khalid Al-Falih has recently paid a two-day visit to Baku on my invitation. I should say that besides him I talked to ministers of Kuwait, Egypt and they are all quite optimistic. On the other hand, they highly appreciate the results of the reached agreements. I have not had relevant consultations with Iran, but I think that Iran will not also oppose the agreement in this case either,” said the minister.

“The way the OPEC members were going to settle this issue among themselves was their internal business. During my meeting with Saudi Arabian Minister Khalid Al-Falih we exchanged opinions, held consultations and agreed that at the next Vienna meeting we would speak for extension of the agreement as it gave such a positive effect – the producers are satisfied and the most important thing is that the global economy managed to absorb this prices. Then the minister left for Russia and Kazakhstan in order to reach agreement with these countries. I think his trip was successful. We also agreed that Azerbaijan would support the proposal to prolong the agreement until the end of the year.”

“It is a little bit harder with Kazakhstan’s position as it launched a new field Kashagan. And it is quite natural that the new field has to reach a certain rate of commercial production. But I think that Kazakhstan will find a solution for this problem. Russian Federation’s Energy Minister Alexander Novak has recently met with Khalid Al-Falih. In the course of the meeting it was offered to prolong the Vienna agreement for the following 9 months, namely till the end of the first quarter of 2018,” he said.

“I think that the results of the monitoring held by the technical committee will be announced at the next meeting fixed for May 25. Besides, there will be made certain conclusions regarding the trends and tendencies we are to face till the end of the year. I mean trends and tendencies on economic growth rates of continents and countries, the rate of current oil demand and supply, and whether there is a too high difference between supply and demand. I think each of us will make a suggestion how to make sure that oil supply does not exceed demand too much. After discussing these issues we will probably decide to prolong the agreement and in case of the necessity maybe we even will increase the production cut. The appeal to other countries to take adequate measures on oil production cut is also rather important,” said the Azerbaijani minister.

One thing is clear that everybody will gain if the price is preserved at $50-60 rate till the end of the year, according to Aliyev.

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