"OPEC+ fulfills its task"
The OPEC deal has practically fulfilled its task, Russia’s Energy Minister Alexander Novak said, speaking today in the Federation Council.
"This agreement has practically fulfilled its task of leveling the crisis moment when prices fell sharply, and even declined in December 2016 to $27," he stressed.
The minister believes that the current level of oil prices stems particularly from the US trade war. "Those (oil price decline) are negative signals for the global economy. Crude prices are volatile and respond to existing general signals," TASS cited him as saying.
"The current prices reflect trade wars statements as well," Novak explained.
Russia restored oil production by 80% in July against the reduction volume within the OPEC+ agreement, he added. "Following the decision on increasing production, in July we have already restored reduction by approximately 2/3 or even by 80%," the minister said.
A senior analyst of 'Uralsib Capital', Alexei Kokin, speaking to Vestnik Kavkaza, noted that the achievement of the deal's tasks does not mean its abolition in the near future. "I think that the OPEC+ format will continue to exist in one form or another. Most likely, the format of cooperation will be changed, since Novak also said that the output growth will not be based on the quota principle, but on the principle of "as many as one can." Somehow, it seems to me that Russia is interested in maintaining the format," he said.
The expert also does not expect that such statements will low oil prices. "Traders will not sell oil because of this, as they know that the opportunities for oil output growth in countries outside of OPEC are very small. Even Russia can increase output only by several thousand barrels of oil per day by the end of year. Novak points out that if necessary, coordination will be continued. That is, OPEC+ is not an emergency measure, but a long-term cooperation," Alexei Kokin said.
Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, in turn, stressed that the cancellation of the deal due to the achievement of its objectives is unlikely. "Most likely, the parties will continue to just change it. The main thrust of the June decision was to switch from quota of production volumes for each individual country to the regulation of production in all participating countries in total to stop monitoring the implementation of the deal by each country, but follow the general guideline for cutting the output instead. Most likely, this logic will be proposed at the OPEC summit on December 4," he said.
"It is important that the situation on the market does not yet allow to lift OPEC's obligations to contain production. The situation is very unstable, which is primarily due to the growing growth in the production of shale oil in the US. This is the factor that does not allow the abandon the deal. Although the prices are high now, the prospects for 2019 are rather vague. If we talk about financial speculators, completing the deal will be a signal for their sell-off, which will lead to a significant reduction in prices, even in the case of a certain deficit on the market," Alexei Belogoriev concluded.