MOSCOW, 6 Oct — PRIME. Reducing the OPEC+ quota by 2 million barrels per day by November has a significant psychological effect, making it clear that low oil prices below $80 per barrel will not suit exporting countries, Alfa Capital portfolio manager Dmitry told RIA Novosti Scriabin.
“A quota reduction of 2 million barrels is just bringing the quota in line with the actual level of production – so, according to the latest data, the backlog reached about 3 million barrels, that is, it is likely that the OPEC + decision will not have a strong impact on physical volumes However, it has a significant psychological effect, making it clear that low oil prices, below $80 per barrel, are not the level that exporting countries are comfortable with,” he said.
OPEC+ during a face-to-face meeting in Vienna on Wednesday decided to cut oil production immediately by 2 million barrels per day from November, taking the levels agreed for August as a reference point. During a press conference following the meeting, UAE Energy Minister Suheil al-Mazroui said that the alliance was concerned about the lack of investment in the industry, as well as falling demand for oil. In September, Brent prices fell to their January levels and remained firmly below $90 per barrel in anticipation of a global recession.
Nevertheless, Skryabin noted, the dynamics of Russian production will primarily depend on the ability to maintain its level after the entry into force of the European embargo from December, on how much volume can be redirected to new markets, especially to the Asia-Pacific region. In total, the country may need to find new buyers for 1.5 million bpd.
OPEC+ cut oil production by 9.7 million barrels per day in May 2020 due to falling demand for oil caused by the widespread fight against covid. Then the terms of the agreement were repeatedly adjusted, and in August the alliance moved to the final stage of exiting its cuts. Under these conditions, OPEC + increases production by 100 thousand barrels per day in September, but in October it reduces by the same volume and returns to August parameters.
At the same time, a number of OPEC+ countries, due to a “natural decline” in production, technical issues or external restrictions, cannot increase production to the level allowed to them. Difficulties, in particular, arose in African countries.