Baku, Azerbaijan, June 14
By Leman Zeynalova – Trend:
The OPEC/non-OPEC agreement on controlling production was always meant to be a temporary measure caused by the crisis of oil dropping below $30 in January 2016, Edward Chow, a senior fellow in the Energy and National Security Program at the Center for Strategic and International Studies (CSIS), told Trend.
He pointed out that the longer term question was always, once the target price (initially set a $60) is reached, how will the agreement be unwound or adjusted.
“When oil price breached $80 last month, producing countries faced the twin risks of dampening oil demand and increasing production from American shale oil, Canadian oil sands, and new discoveries elsewhere, which led to previous oil price collapses,” added the expert.
As for the situation in Venezuela, where the oil output is going down and regarding Iran, Chow noted that this may be the occasion of the short term concern, but the longer term challenge for the OPEC/non-OPEC agreement was always there - how to seek the right balance for a stable desired price level without over-correcting by producing too little or too much.
“I expect Saudi Arabia and some of its Gulf Arab allies, as well as Russia, to increase their production, while maintaining that the agreement to control production still holds. Just how much of an increase will depend on the outcome of the meeting on June 22,” he concluded.
According to secondary sources, total OPEC-14 crude oil production averaged 31.87 million barrels per day in May, an increase of 35,000 barrels per day from the previous month, OPEC said in its June Oil Market Report.
OPEC crude oil production is expected to increase slightly to an average of 32.1 million b/d in 2019, said the EIA.
“The increase in production in 2019 is expected to occur despite falling production in Venezuela and Iran. EIA assumes these decreases will be offset by increasing production from Persian Gulf producers, primarily Saudi Arabia,” said the report.
In December 2016, at a meeting of oil producers in Vienna, 11 non-OPEC member countries agreed to cut oil production by a total of 558,000 barrels a day. The agreement was concluded for the first half of 2017 and was extended until the end of the first quarter of 2018 at a meeting on May 25, 2017.
At the last OPEC meeting in Vienna, the agreement was again extended until the end of 2018. Azerbaijan supported the decision.
---
Follow the author on Twitter: @Lyaman_Zeyn
