OPEC +: New Year's Eve of Unheard of Generosity
What did the ministers decide
The first ministerial meeting of the participants in the OPEC + deal, which began in 2021, was awaited by many with considerable concern. And not only because it was already the 13th in a row.
Alas, the positive expectations associated with the start of the Covid-19 vaccination were not met. New strains of the virus intervened, and as a result - a wave of quarantines and lockdowns, which are also combined with the beginning of the implementation of the notorious Brexit.
In this regard, the question of seriously weakening restrictions on the production of hydrocarbons was not even raised. He fell away as if by itself.
Recall that an agreement to reduce quotas was reached at the previous OPEC + ministerial meeting, which took place in the fall of 2020. In fact, in the midst of the second wave of the pandemic (Oil in 2021: Russia will leave OPEC in the black).
The September reduction in production quotas by 2 million barrels per day was to be followed by another - already to 5,8 million.
But the first day of the oil summit only confirmed fears - no one waited for any recommendations on what would happen to production quotas in February and March 2021. And this is after six hours of tense negotiations.
On January 5, the general meeting, in general, had to be delayed, since Saudi Arabia and Russia needed additional time to resolve the accumulated contradictions.
The flagships of the OPEC + deal, the two countries that make the maximum contribution to its implementation, had to very demonstratively do without intermediaries.
Sheikh bonus
For the Saudi sheikhs, another wave of large-scale decline in oil prices, which is simply impossible to avoid without prolonging the OPEC + agreement - is like death.
Russia is less and less sensitive to fluctuations in oil prices every year. But this is not the main thing - our oil industry has a kind of safety cushion.
This is a hefty set of fixed contracts for the supply of black gold, both domestically and in the near and, more recently, in the far abroad.
Moreover, Russia can always count on the support of a number of participants in the deal. First of all - Venezuela and Kazakhstan. And to a somewhat lesser extent - Iran and Iraq.
You should also not discount the Syrian oil. At the same time, Russia has much less technological room for maneuvering production volumes than most of the OPEC member countries.
Nevertheless, it is from Russia that the OPEC + parties have demanded the impossible on more than one occasion - practically shutting down wells, which remain unprofitable when oil prices are below $ 20-25 per barrel.
Why, then, in January 2021, Saudi Arabia (where they did not hide their readiness to unleash a new oil war at any time) decided to abandon the stick and urgently used the carrot?
After all, this is how the increase in production quotas for Russia, and with it for Kazakhstan, should be regarded. It is known that Russia can add 65 thousand barrels to the current level of oil production, and Kazakhstan - 10 thousand.
Russia will be able to produce 2021 million barrels per day in January 9,119. That is 1,881 million barrels below the base level of 11 million barrels. Then the mark will rise to 9,184 million barrels in February and to 9,249 million barrels in March.
Quotas and anti-quotas
But there is no need to rush to call Russia and Kazakhstan such beneficiaries - winners in a battle with greedy sheikhs.
The fact is that in January 2021, the total volume of production restrictions under the OPEC + agreement will still be softened.
Softened from 7,7 million barrels per day to 7,2 million barrels. This, we recall, instead of the expected - 5,8 million. As you can see, oil production in general will grow by 500 thousand barrels per day.
At the same time, the relief affected (with the exception of Saudi Arabia) almost all participants in the OPEC + deal. The share of the countries that make up the cartel will have 75 thousand barrels in January, and the same amount in February.
These are just Russian and Kazakh antiquots. Non-OPEC members will be able to produce as much as they did in December 2020. At the same time, members of the cartel also have good opportunities to increase production.
OPEC has already outlined a reduction in quotas to 7,125 million barrels in February and 7,05 million in March. However, no one wanted to risk splashing 2 million additional barrels into the market at once.
You can get the missing half a million in just three months. This is exactly what the new agreements of the participants in the OPEC + agreement reached on January 5 allow. In accordance with them, the reduction quotas can change monthly in any direction.
But there is also a limitation. The range of changes is no more than 500 thousand barrels. The Ministerial Committee called on
"To maintain increased caution while increasing oil production in order to prevent a new imbalance in the market."
Participants in the January summit almost unanimously consider it necessary to return at least 2 million barrels to the market, doing this gradually, taking into account market conditions.
Particular attention will be required to assess the proposal from countries not participating in the OPEC + agreement, and how it may affect the overall stability of the market and the global oil balance as a whole.
Qatar factor and Iran factor
To compensate for such significant losses in quotas, the sheikhs from Riyadh, with unexpected ease for many, went on to further reduce their own production - by 1 million barrels at once. Thus, the informal leader of the oil cartel decided to confirm his adherence to a flexible approach to regulating production volumes.
Such a step, according to the representative of Saudi Arabia - the head of the Ministry of Energy Abdel Aziz bin Salman, was made at the negotiations
"Taking into account not so much the expectations of the first results of mass vaccination and economic recovery, but the momentary situation with the pandemic."
The same base level of production as in Russia - 11 million barrels per day with the same level of decline of 1,881 million, in Riyadh they decided to voluntarily cut another million barrels.
Most likely, this was done to mitigate the negative effect on the market from the lifting of the diplomatic and economic blockade from Qatar.
This country, which was kept afloat for a long time (and actually alone) by the sanctioned Iran, deftly played in its position as a kind of “Arab outcast”. There they clearly turned a blind eye to the semi-legal trade in oil and oil products.
This greatly hampered the implementation of the OPEC + deal, no matter how much the participants themselves praised it. At the moment, it is not so much the "legalization" of little Qatar with its meager quota that is dangerous for the OPEC + agreement. Much more dangerous is the fact that Iran will have to be somehow legalized behind it.
Iran (by all indications) cannot avoid a new portion of sanctions due to the announcement of another violation of the "nuclear deal". And this is a preemptive strike against OPEC +, in which Tehran, we recall, managed to get along peacefully with Riyadh and even with Washington.
Information