Three conferences and meetings of OPEC, OPEC+ and OPEC+ Ministerial Monitoring Committee ministers were held on 30 November.
OPEC+ countries agreed that the total production cut volume of all members of the alliance in 2024 will be 2.2 million barrels per day. Given that Riyadh has already reduced oil production by 1 million barrels per day, and Russia by 300 thousand barrels per day, the alliance countries will also reduce production by only 100 thousand barrels. 900 thousand barrels daily.
Saudi Arabia will keep production at the current level of 9 million barrels per day, taking into account the reduction in oil production that has already begun. Some alliance countries, including Iraq, Kazakhstan, UAE, Kuwait, Algeria and Oman, increased their raw material production level to total 700 thousand barrels daily.
Russia will increase the voluntary additional reduction in exports of oil and oil products by 200 thousand barrels per day. 500 thousand barrels daily. After the OPEC+ meeting, Russian Deputy Prime Minister Alexander Novak announced that we are talking about 300 thousand barrels of oil and 200 thousand oil products.
At the meeting of OPEC+ countries, it was decided that Brazil will join the alliance from January 2024, but without a specific quota for oil production (that is, it will not reduce the quota yet). said Interfax source. In September, oil production in the country increased by 6.1% compared to August and reached 3.672 million barrels per day.
The next OPEC+ meeting will take place on June 1, 2024.
What will the alliance’s decision lead to?
“There were no firm predictions or expectations on the eve of the OPEC+ meetings. The alliance’s decision seems justified. “This will allow us to comfortably go through the period of seasonal low demand for oil,” Vasily Karpunin, head of the information and analytical content department of BCS World of Investments, commented to socialbites.ca.
Sergei Suverov, investment strategist at Arikapital Management Company and associate professor at the University of Finance under the Government of the Russian Federation, says OPEC+ is also trying to protect oil prices from further declines and prevent budget deficits from growing.
Sovcombank chief analyst Mikhail Vasiliev said that the Brent price showed negative dynamics, including a reduced risk of worsening the situation in the Middle East, during the month prices fell from $ 93 to $ 80 per barrel.
“OPEC+’s decision was difficult for the cartel. The alliance is losing market share to non-member countries, including the United States. “In addition, the decision also affects the operating indicators of oil producing companies,” Suverov added.
Maxim Osadchiy, head of the analytical department of BKF Bank, said that countries not included in this cartel, especially the USA and Iran, are actively increasing oil production.
“US crude oil production rose to a new monthly record of 13.24 million barrels per day in September. The analyst stated that oil production increased by 1.7% during the month.
According to Vasilyev, investors expected a decrease in oil production of 1 million barrels per day.
“So the decision turned out to be a little lower than expected and less official than the market expected. The analyst stated that this was probably the reason why Brent oil prices fell from $ 84 to $ 80.5 per barrel after the results of the OPEC + meeting were announced.
Vasiliev does not expect a significant increase in the deficit in the global oil market within the scope of the decision.
How will this affect Russia?
BitRiver financial analyst Vladislav Antonov stated that Russia’s participation in OPEC + ensures stability in the global oil market and increases Moscow’s reputation and influence in international relations.
Karpunin believes that whether Russia will gain from the decision taken depends mainly on oil prices.
“Given the still inelastic oil market, relatively lower production could lead to a greater impact on the price. Therefore, the total revenue of oil companies with this solution could be greater at lower prices than without this solution,” he said. explained the expert.
Vasiliev is confident that the Brent barrel price will remain in the range of 75-85 dollars per barrel in the coming months.
Associate Professor, Department of Economic Theory, Russian Economic University. GV Plekhanova Tatyana Skryl expects oil prices to increase in the future. The economist’s logic is as follows. In the world market, it seems unlikely that the current decreasing export volume will be replaced by the reserves of non-cartel countries. Therefore, oil prices will continue to rise and energy inflation will accelerate in the West, where energy resources will be scarce.
According to Skryl, rising oil prices benefit the Russian economy.
“Despite the sanctions, practices show that Russian Ural oil is sold above the established ceiling price of $60 per barrel, thus filling the budget with oil revenues. The cut decision in Russia only concerns export supply, not production. “Moscow will continue to produce oil primarily to meet domestic demand,” the expert said.
Positive effects for Russia – overcoming sanctions, increasing tax revenues to the budget of Russian exporting companies as a result of rising oil prices, were listed by the Doctor of Economics, Professor of the Ministry of Foreign Affairs and the Municipal Administration of the University of Finance. Russian Federation Yuri Shedko.
According to Suverov, oil prices are important for ordinary citizens because the filling of the budget and the possibility of financing, including social programs, depend on them.
“The OPEC+ decision will support Russia’s export earnings and foreign exchange earnings flows; This is a positive development in terms of the ruble exchange rate and inflation. Sustaining export earnings will support the Russian economy, the profits of oil companies and related industries, and support employment and incomes of citizens. Vasiliev predicted that the ruble exchange rate will remain stable in the range of 85-90 rubles per dollar in the coming months.
What will happen next
Antonov suggested that as global demand recovers in the second half of 2024, OPEC+ may begin to ease restrictions to benefit from growth in the oil market. The analyst admitted that this would bring additional profits to producers, but could also lead to some decline in prices compared to peak levels.
“The decision that the alliance may take in June 2024 depends on many factors: Changes in oil demand, dynamics of production levels in countries that do not participate in OPEC +, shale oil production in the USA, the status of DUC reserves. (drilled but incomplete wells – incomplete wells that have been drilled but not equipped for production). Most likely, the status quo will continue in June 2024,” Shedko concluded.