World oil prices to be 'frozen'

World oil prices to be 'frozen'

All of OPEC countries as well as independent exporting countries, including Russia, supported freezing oil output, OPEC Secretary-General Mohammed Barkindo said.

"All of OPEC’s 14 members as well as erstwhile rivals such as Russia are committed to finalizing the agreement, which will be announced on November 30," he said in a Bloomberg television interview.

Barkindo added that OPEC made “significant progress” when technical experts from member nations gathered in Vienna on October 28 to work on details of the deal. 

He noted that it is too early to say how much these non-member producers may be willing to cut.

Advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to Vestnik Kavkaza, noted that on the one hand, achieving a certain agreement can already be considered a success.

However, the expert stressed that on the other hand, we should not have too high expectations of the agreement. "There are many countries which are critically dependent on energy exports and which will not cut their production. For example, the budget of Saudi Arabia depends on hydrocarbon exports by more than 80%, and Venezuela's budget by more than 90%. It is likely that their representatives will make tough statements that they allegedly support particular agreements. On the other hand, according to the 1980s, a significant part of OPEC members is not going to implement their own statements," Hestanov noted.

"Therefore, from the point of view of the Russian economy, of course, any decline in oil supply on the market is welcome, but in practice we should not expect great results from it," the advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house pointed out.

Apparently, this skepticism is shared by market participants. Therefore, the past few days the price of oil in moderation, but reduced, the expert reminded.

According to Hestanov, the situation is being exacerbated by shale oil producers. "At the moment, not the "freeze" is needed to increase oil prices, but the decline in oil production. However, it is also unlikely to help: in 1985, oil exporters failed to reach an agreement, and oil prices have fallen fourfold. And now there are shale oil producers on the market, with whom it is impossible to reach an agreement," he said.

"Now, any agreement to freeze or cut production will lead to the fact that part of the oil market will be given to the producers of shale oil," the expert warned.

Finally, he recalled that we must not forget China, which has already entered into a second agreement with BP to extract shale gas and shale oil. "Most likely, it will take about 3-4 years to develop a technology. And we can imagine what will happen next, given the fact that China is estimated to have the world's largest shale gas reserves and, perhaps, the world's second largest shale oil reserves," Sergey Hestanov concluded.