Early this morning, the high-profile closed-door OPEC ministerial policy meeting was held in Vienna. The entire closed-door meeting lasted more than six hours. At 6 o’clock this morning, OPEC representatives announced that the OPEC conference in Vienna had ended, and announced the content of the OPEC+ production reduction agreement: a production reduction of 500,000 barrels per day, which needs to be discussed with OPEC+ countries on Friday. Final details.
In this regard, Saudi Energy Minister Abdul Aziz said that in the process of cooperation with non-OPEC Before the countries meet, we cannot say that we have reached an agreement. “OPEC will announce relevant decisions tomorrow (Vienna local time), and all issues related to production cuts will be clear tomorrow.” Saudi Energy Minister said. Kuwait Oil Minister Rushdie declined to comment on the content of the agreement.
As of the close this morning, the S&P rose 0.15%, the Dow rose 0.1%, and the Nasdaq rose 0.05%. U.S. Treasury yields rose 2 basis points. The dollar fell 0.2%. COMEX February gold futures closed up 0.2% at $1,483.10 an ounce. Oil prices did not fluctuate much, with WTI crude oil falling 0.03%; Brent crude oil rising 0.29%.
The meeting of the OPEC+ ministerial-level joint production reduction supervision committee was held first, and the three major oil-producing countries expressed different opinions
On Thursday, the 5th, Eastern Time, the OPEC+ ministerial-level joint production reduction supervision committee meeting was held. The meeting of the Committee (JMMC) was held first. After the meeting, Russian Energy Minister Novak stated that the conclusion of the meeting was that in order to safely survive the seasonal demand period in the first quarter of next year, the JMMC may recommend that OPEC + reduce production based on the current scale. Production will be further reduced by 500,000 barrels per day. OPEC+JMMC will meet again in March next year and study the situation then. Novak also said that OPEC+JMMC recommended excluding condensate production data from monitoring Russian oil output. All OPEC+ countries agree with this recommendation on condensate.
Iranian Oil Minister Zanganeh said that Iran supports the majority decision of OPEC to reduce production and that OPEC should pay attention to the long-term situation. If Full implementation of the production reduction agreement and OPEC’s extension of the agreement will be an “achievement.” “OPEC has been losing market share over the past 45 years, and over-producing countries should bear the burden of any deeper production cuts. I will support the decision taken by the majority of OPEC members, but will not accept any restrictions on Iranian crude oil production. I have no objection to Russia’s decision to Regarding the position of condensate, we do not believe that there is any reason for difficulties at this OPEC meeting. We will negotiate with the United States, and U.S. sanctions on Iranian banks and energy should be fully lifted,” Zanganeh said.
Previous market news said that Nigeria may agree to deeper production cuts if it “is an option.” Nigeria’s Oil Minister Kachiku said that OPEC is discussing the possibility of production cuts, and Nigeria’s implementation rate of production cuts in November is 100%. Kachiku believes that oil prices should be around US$60 per barrel. He also admitted that Nigeria’s Egina oil field is operating well, but production cuts will have some impact.
Learning from history, a review of the OPEC Conference in the past five years
2014 On November 27, OPEC member states failed to reach an agreement on production cuts, and subsequently exceeded their production targets. On the day of the OPEC meeting, U.S. crude oil plummeted by nearly $7 per barrel, or more than 6%.
Instead of cutting production, the OPEC meeting on December 4, 2015, raised the upper limit of crude oil output from 30 million barrels per day to 31.5 million barrels per day. Oil prices in Europe and the United States plunged. , the main U.S. crude oil futures fell more than 2 US dollars to below 40 US dollars per barrel, a drop of nearly 2.8%.
Before the meeting on June 2, 2016, representatives of various countries had different views and differences, and did not spend too much time discussing production targets. After the meeting, an OPEC representative said Without an agreement to freeze production, U.S. crude oil fell 2% in the short term, but later recovered its losses. A meeting was held on December 9, 2016. On December 12, due to news that OPEC had reached an agreement with non-OPEC oil-producing countries, U.S. crude oil surged by 5% at the opening. However, in the following trading days, the OPEC monthly report showed that , a supply surplus of 950,000 barrels per day, which caused oil prices to fall continuously.
On May 26, 2017, it was agreed to extend the current agreement to reduce production by 1.8 million barrels per day until the end of March 2018. Although OPEC’s action on Thursday was expected by the market, some oil market investors had previously hoped that oil-producing Congress would agree to extend production cuts for a longer period of time, or to increase the scale of production cuts to consume excess global crude oil supply. However, as the market had already responded with disappointment on May 25, and at the same time, during the meeting on May 26, relevant OPEC ministers expressed surprise at the market response, oil prices bottomed out and rebounded by 2.38%, but on May 25 A drop of more than 5%.
On June 22, 2018, OPEC and non-OPEC oil-producing countries agreed to return the production reduction implementation rate to 100%, and the “OPEC+” production reduction quota plan returned to 1.8 million barrels per day. The theoretical relative production increase target is 846,000 barrels per day. However, the intraday increase was as high as 5.29% due to market concerns that Iran’s production reaching zero would be enough to offset the impact of OPEC’s increase in production. On December 6, 2018, production was cut by 1.2 million barrels per day, and the decline narrowed from around 5% to 2.29%. However, the overall trend was bearish as demand concerns still put pressure on oil prices.
On July 1, 2019, it was unanimously agreed to extend production cuts until March 2020, in line with market expectations, and oil prices oscillated at US$2.5. It is worth noting that this meeting was originally scheduled for the end of June, but because Russia believed that it should not conflict with the G20 meeting, it chose to postpone it.
Market participants: The current production reduction agreement is of little significance
The production reduction agreement After the announcement, Hiley, head of OTC energy trading at LPS Partners in New York, said that the current production reduction agreement does not have much practical significance and will not change the oil supply situation on the market. It is not very good or bad for oil prices, which is why oil prices fluctuate up and down.
Other analysts said that because Saudi Arabia has been significantly exceeding production cuts, this production reduction proposal is just to set Saudi Arabia’s actual production reduction range to the prescribed production reduction range. If Saudi Arabia no longer cuts excessive production under the agreement to deepen production cuts, the current market supply and demand balance will not be changed in the first quarter of 2020.
Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, said that if demand rebounds cyclically and OPEC cuts production, Brent crude oil prices may reach $70 per barrel by the middle of next year. about. Supply disruptions had a major impact on the market in 2019, helping to support oil prices. Bank of America Merrill Lynch expects OPEC to “extend production cuts and pretend everything is fine.” Saudi Arabia may push Iraq to reduce production. OPEC’s target for next year is expected to be above $60. </p
