BAKU, Azerbaijan, Dec.3
By Leman Zeynalova – Trend:
The first priority of OPEC ministerial will be to decide if they want to continue the ongoing OPEC+ cooperation, which includes not only Russia but also some other FSU countries etc., Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and SVP MEA-Risk, told Trend.
The latter cooperation is necessary to stabilize the market further as they have the majority of global oil production, according to the expert.
“The second, they will need to discuss if more deeper production cuts are necessary, or as I would do make sure that all members in reality will commit and put in place 100 percent compliance of their respective cuts agreed on. Until now several main producers, such as Russia and Iraq are keeping not to their promises. So by implementing the latter no new cuts are needed, as this already would take out several 100,000s bpd from the market,” said Widdershoven.
He said the third focus is to assess what the US shale position will be in 2020. Looking at current financials of shale oil companies in the US, which are heavily debt laden, the future of shale is more bleak than currently is being stated.
“This will be having a major impact on the market, as OPEC+ market share has been hit by growth of US shale. If the latter is struggling to produce, OPEC share will increase. The fourth is that OPEC will have to find a good solution to deal with market fundamentals, price settings, while thinking about the overall success needed for the Aramco IPO and share price settings. The latter will be on the mind of OPEC/Saudi Arabia for sure.”
The fifth, the internal cohesion is under pressure, as Venezuela, Iran, Iraq are in turmoil, Libya struggling while others are also not stable, noted Widdershoven.
The expert believes the best option at present is to do nothing, keep production cuts in place, but force members to adhere to their volumes set. “The latter will stabilize market, increase in the end due to shale oil issues market share, and get the ball rolling.”
In late 2018, OPEC and a number of countries outside this organization (OPEC+ format) decided to modernize the terms of the agreement on the reduction of oil production, in force from the beginning of 2017. The countries agreed to reduce the total production by 1.2 million barrels per day from the level of October 2018.
On July 2, 2019, a decision was made in Vienna to extend the agreement on reducing oil production by OPEC member and non-member states until the end of the first quarter of 2020.
The 177th Meeting of the OPEC Conference is expected to be held December 5, 2019, followed by the 7th OPEC and non-OPEC Ministerial Meeting on December 6 in Vienna, Austria.
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