How will OPEC meeting affect oil prices?

According to experts, oil prices could reach $100 


The Joint OPEC-non-OPEC Ministerial Monitoring Committee (JMMC) convened in Algiers, Algeria for its tenth meeting, on 23 September 2018. The Committee reviewed the monthly report prepared by its Joint Technical Committee (JTC) and the short-term developments in the global oil market, including prospects for 2019. The meeting assessed the effectiveness and impact on the market of the decision on increasing oil production by 1 million barrels per day which was made at the 4th OPEC and Non-OPEC Ministerial Meeting of 23 June 2018. According to Azerbaijan’s Energy Minister Parviz Shahbazov, the OPEC countries have achieved a conformity level of 129% in August 2018, and 109% in July 2018 which is considered to be significant improvements in market balancing compared to May: "Although the OPEC deal has not yet been fulfilled by 100%, the progress is satisfactory. The overall opinion of the OPEC and non-OPEC countries is that the current approach to increasing production allows to maintain achievements by the end of the year, and there is no need for distribution of production volumes.” The meeting emphasized the importance of coordinated activities and continuous regulation in order to fully implement the June decision of OPEC countries. It was decided to reconsider the market situation and take adequate decisions from 2019.

Head of the Oil Research Center, expert on energy issues Ilham Shabansaid that main expectation regarding the Algerian meeting was the determination of quotas: "The meeting had to decide how much oil production in OPEC countries should increase or decrease. In fact, OPEC countries have applied for the redistribution of quotas in June. But the Algeria meeting did not touch upon this issue. Instead, the results of August monitoring were put on the agenda of the meeting. In general, the market participants are also unaware what will further happen. Saudi Arabia, which is considered to be OPEC's top exporter, Russia, which is trying to lead non-OPEC countries, have decided to slow down for some time. They try not to hurry. Some issues will be put on the agenda again at the next stage. Besides, several contradictory figures were sounded at the meeting. For example, the representative of Iran expressed satisfaction with the results of the meeting in OPEC + format and noted that according to the August results, Iran has not reduce production. But according to OPEC's estimates, Iran has reduced its oil production by 3.58 million barrels. On the other hand, according to statistics estimated by international energy agencies, Iran's oil exports decrease to less than 2 million barrels. According to the August results, South Korea and France have completely ceased oil imports from Iran. China, Japan and India have officially declared their reduction in oil imports from Iran as well. Based on these statements, we can say that the decline should have taken place in Iran's oil exports. In this regard, statistics presented by the Iranian official were false. I think that OPEC should have commented on this fact. At the same time, Russia’s Energy Minister Alexander Novak said in a press statement that there is no change in Iran's oil production and exports. This statement shows that in fact, Russia and Iran do not reveal real facts and thus, demonstrate their attitude to the US sanctions.”

According to the expert, the prices will stabilize over time: "Novak noted that it is impossible to predict things after the US sanctions come into force in November. Thus, oil prices have exceeded $80 in the world market. In fact, the production was expected to increase in countries. However, it did not happen. As a result, the risk of deficit further increased, and markets responded immediately to the issue. On the other hand, Venezuela, with its economic situation, has lost almost as much oil as Iran as its national oil company can not produce oil in the previous volume. As a result, the production decreases. This leads to psychological tension in markets. As a result, oil prices rise. In this case, the price of oil can reach even $100. But this will not last for a long time. I think, by the end of 2018, price fluctuations will continue as a broken line. The statements will increase and decrease prices in the market. After a certain period of time prices will stabilize.”

Expert on energy issues, Zafar Valiyev emphasized that the increase in prices is temporary: "The Algeria meeting is one of the regular meetings of OPEC countries. On the eve of the meeting, media outlets reported that discussions on the reduction of production volumes of the member states of the Vienna pact will be put on the agenda. Oil ministers of Saudi Arabia, the United Arab Emirates and Russia said there is no need to increase production volumes today. On the other hand, in connection with the fall-winter season, technical inspection of oil refineries in the world is carried out. That is, the refineries have reduced 30-40 percent of their processing power. Oil demand will reduce in the fourth quarter of 2018 and in the first quarter of 2019. In this regard, increase of production volumes can prevent the restoration of balance in oil markets. Next year, non-OPEC producers will increase oil production. Forecasts suggest that the US oil production in 2023 will be 13.4 million barrels, while non-OPEC producers will supply more than 60 million barrels of oil. Based on all this, we can say that it is not expedient to increase oil production in current conditions. Now the price of oil is $80. But this is temporary. In a short period of time, prices are expected to fall again because the oil demand will be reduced in the coming months.”


Shabnam Mehdizade

25.09.2018 17:00 / Hits: 71 / Print
    Bu bölmədə
     News feed
    2019 All right reserved Powered by Danneo