Russia is ready to take part at the Organization of the Petroleum Exporting Countries' (OPEC's) meeting together with other non-cartel countries in February, Russian Energy Minister Alexander Novak said today.
"The OPEC countries are currently trying to convene the meeting in February, which will be attended by both OPEC and non-OPEC members. Certain countries have proposed this initiative, this issue is currently being reviewed. We confirmed our readiness to participate in such a meeting," TASS cited Novak as saying.
He noted that the date has not been determined yet. "We can meet at any time. The date is still under discussion with other countries," he noted.
Sberbank CIB analyst Valery Nesterov said in an interview with a correspondent of Vestnik Kavkaza that, in the first place, it's a good thing that the parties decide when they will meet and what they will be discussing.
"Secondly, timid and scattered signals are coming from Russian companies as well, that they are willing to revise their production programs to achieve a decline in production. The fact that officially the government does not have the right to order companies to reduce production by a specific amount. It is clear that the current oil price is two times cheaper than milk, 4-5 times cheaper than water – they say that a barrel of oil is equal to the average price of a Norwegian salmon weighing 4 kg. Of course, this is nonsense. Therefore, the price won't remain that low in the long term. But the sooner the problem of unreasonably low prices is solved, the sooner the situation both in the industry and the global economy will be stabilized," the analyst stressed. "At the same time, it is of course too early to say that we will agree with the OPEC members," he believes.
"First of all, we cannot use wells in the winter, because water freezes in Western Siberia. But the situation will improve in the summer. However, it is difficult to imagine that it's only OPEC and Russia which will make a decision. The decision must be coordinated with other major exporters: Canada, Mexico, Norway, and, of course, the United States," Valery Nesterov noted.
"What will the contacts between Russia and OPEC bring? In fact, we have already had a history of cooperation in the 2000s, when we decided to reduce production, but it was not implemented in the end," the expert said.
He stressed that the quota must be united, that there should be a uniformity in understanding what it's all about.
"The deficit is of 1-2 million barrels a day. And it's not necessarily to compensate the full deficit. And even if the market will receive a signal that countries reduce their production by, for example, 5%, or take measures to reduce the supply by 50% of the excess in the market, this can be enough to increase prices. And after all, we must not forget that a complicating factor now is the uncertainty of how quickly the US oil shale extraction will be able to return in the market in the event of a sharp increase in oil prices (up to $ 40-50). On the one hand, of course, they say that they are able to restore production very quickly, and, consequently, it will again put pressure on the oil price. On the other hand, while there was no precedent of the return of shale oil producers. It is clear that they reduce production when prices fall, but it is not clear how quickly they will increase it. There is only an understanding that US financiers and investors are not so optimistic about their shale oil and its prospects anymore. Still, on the one hand, they have already "squeezed it out", but nevertheless, they have to limit their work. Now only the most profitable deposits are being developed and many other are frozen," Valery Nesterov concluded.
Senior analyst at Uralsib Capital Alexey Kokin said in an interview with a correspondent of Vestnik Kavkaza that the likelihood is not very high that OPEC and Russia will work out some solution, or that OPEC will make a decision without Russia.
"The period of low prices at the level of $30-35 per barrel should last much longer in order for an extraordinary reduction in production to happen, and Russia could participate in it. In my opinion, for several months. Maybe even six months, or up to a year. Then it is possible that OPEC and Russia will take some decisions. I think that in February is the period of time that is worth being discussed," the expert said.
As for oil prices, they may increase without the participation of these countries: "It is just a natural process of growth in demand, which grows due to the fact that the global economy is still growing. And the process of underinvestment in the production of oil inevitably continues. Sooner or later they will play in the same direction, and the price will strengthen, even regardless of the decisions of manufacturers, because not everything is in the hands of OPEC. We are still waiting for the level of $50 in early 2017,'' the analyst told.
As for the issue of how much oil production quotas may reduce, the senior analyst at Uralsib Capital assumed that OPEC may reduce it by about 1 million barrels a day at the June meeting: "It is possible, but so is Russia's participation in this process, Russia produces slightly less than 11 million barrels a day, so taking into account such a volume it would be possible to decrease it by 5% – a bit more than 500,000 barrels a day, but not more,'' Alexey Kokin summed up.
