OPEC+ decides to cut production again

MOSCOW, 6 Oct — PRIME. The OPEC+ countries, following a meeting on Wednesday, announced new large-scale cuts in oil production – by two million barrels per day from November compared to the level of production that was allowed to the alliance in August.

The expert told how the decision of OPEC + will affect the global economy

The decision was made despite the unfolding energy crisis in Europe and rising energy prices in other regions of the world.

Speaking at the final press conference, Saudi Energy Minister Prince Abdulaziz bin Salman explained that the alliance has successfully coped with the coronavirus pandemic, but now a period of new uncertainties has begun. Therefore, as usual, OPEC + decided to act proactively for the benefit of all parties.

“We remain committed to the global economy, to the good of producers and consumers, no matter what actions we take earlier, today or in the future. We will demonstrate to you now and then that everything is done in order to be attentive to the needs of the world,” he said. .

“What we are doing is very important both for other exporting countries that are not members of OPEC +, and, I must say, for other importing countries, so that a good share of their needs (in energy resources) is produced in the domestic market,” concluded he.

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LACK OF INVESTMENT

The Saudi minister, speaking about the good for all, obviously again referred to the problem of underinvestment in the industry and the lack of thought in the energy policy, primarily of Western countries. Consumers are demanding that OPEC+ respond to the short-term needs of the markets, but forget about the limited production capacity that they do not want to invest in.

“Energy is something that can never be rigged with short-term solutions. Energy markets require constant attention, careful planning, constant investment and leadership, without which investment will not occur, investors will not come, and, as you can see with your own eyes, a devastating anomaly will be created for global economy,” he said.

In support of his words, bin Salman cited a table with prices for various energy carriers. According to its data, after the jump in February-June in September, oil prices in the world actually returned to the level of January. While gasoline prices in the US rose by 11%, LNG in France – by 76%, Asia – 65%, the UK – 69%, gas in the USA – 84%, coal in China, Europe and the USA – by 33%, 109% and 125% respectively.

Thus, the Saudi minister showed that the OPEC + policy leads to stability, and the mistakes of the governments of consumer countries speak for themselves. And although he reiterated that he does not like to talk about prices, oil quotes reacted to the OPEC + decision with growth, thereby clearly demonstrating the alliance’s message: “If consumers do not want to think about investments, we will think for them.”

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UAE Energy Minister Suheil Al-Mazuri also added that there is a lack of investment in the oil industry, and the price of oil is one way to influence this.

“I have to remind our friends here that the key to OPEC+’s success is, first and foremost, our unity. It’s very simple, and we encourage other international organizations to follow our example, because at least we have examples of our success ‘, bin Salman said in his speech.

ENERGY WEAPON

Contrary to OPEC+ claims that their decision, which comes with a condition to extend the deal until the end of 2023, aims to create a long-term and transparent market coordination scheme, the US said it was short-sighted. In addition, according to Washington, OPEC + agreed with Russia, “wrongly” deciding to cut oil production.

REAL ABBREVIATIONS

However, the actual OPEC+ cuts should actually be much smaller, as many countries are already falling behind their production levels. Similar problems have been observed in some African countries for a long time due to underinvestment in the industry and due to sanctions restrictions against Russia.

Thus, under the new conditions, Russia from November to the end of 2023 can produce 10.478 million barrels per day, reducing production from the conditional August level of 11.004 million. However, the country currently produces much less, according to Russian Deputy Prime Minister Alexander Novak, the current production is 9.9 million barrels per day.

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In turn, the Saudi minister explained that the real reduction in production will be 1-1.1 million barrels per day.

As for the start of the EU embargo on Russian oil and the possible introduction of a price limit for it, the alliance does not yet know how this will affect the market, he said.

“We have so many uncertainties. We don’t know what will happen with the embargo, we don’t know yet how the price ceiling will work, who is going to support it and what its impact will be,” said bin Salman.

The next scheduled meeting of the OPEC+ alliance is scheduled for December 4. It is noteworthy that the next day, that is, December 5, the embargo on the supply of Russian oil by sea to the EU countries officially comes into effect.


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