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There are only days left till OPEC's next meeting, with all eyes
now on Russia's response. It's now clear that even if some of the
cartel's members would have wished to be able to increase their
production, the performance of oil prices this year does not
provide an opportunity for any further thought. OPEC members will
proceed with the current agreement which will stay in place at
least till the end of 2020 Q1. But it won't come as a surprise if
this week's meeting results in deeper cuts. However, the big
question is whether Russia which has been leading the coalition of
OPEC+, together with Saudi Arabia, is willing to negotiate further
cuts. The message has been clear, with no appetite for such a deal.
Officials of OPEC members such as Iraq's oil minister did, however,
commented that the group would discuss further cuts of 400,000 b/d,
which would bring the total to 1.6 million b/d.
Focusing on Russia, the country's crude and condensate
production has remained above its target level under the OPEC+
agreement, with November's output estimated around 11.24 million
b/d. This would simply mean that Russia hasn't been fully
complying, even if it has gradually reduced its production since
early 2019. Moscow's argument is that the crude supply disruptions
caused earlier this year by a major contamination of crude shipped
to Europe via the Druzhba pipeline pushed production marginally
higher after the summer. This has caused production to surpass
Russia's target under the OPEC+ deal since August.
Russian energy minister Alexander Novak has been saying that the
country has been aiming to comply but meanwhile has been trying to
exclude new condensate volumes from its quota. With more gas fields
to come on stream, there will be more condensate which won't be
exported. The ministry has been estimating condensate volumes
around 8% of current total production.
In terms of shipments of crude oil, Russia maintained activity
close to 4.7 million b/d in November, with the market share of the
Baltic Sea having slowed down in favour of shipments from the Black
Sea. Year-on-year between January and November, shipments from
Russia went up 3%, as data by Commodities at Sea suggests.
Posted 03 December 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade
