Introduction
On December 5, the Organization of the Petroleum Exporting Countries (OPEC) will hold a meeting at its headquarters in Vienna, followed by OPEC+ talks with other oil-producing countries led by Russia. According to OPEC sources, in order to support oil prices, OPEC and its allies may extend oil production restrictions until June next year when they meet next month.
After entering 2019, the Organization of the Petroleum Exporting Countries (OPEC) officially implemented a production reduction plan to boost oil prices. Although as of October, OPEC production has dropped to 29.65 million barrels per day, but due to demand The reason for the sluggish growth is that OPEC’s production cuts have not been as effective as expected in boosting crude oil prices. More importantly, as demand declines, OPEC may need to extend the production reduction agreement or even further expand production cuts to maintain current oil prices.
According to OPEC’s latest monthly report, OPEC expects global market demand for the organization’s crude oil to be 29.6 million barrels per day in 2020, a decrease of approximately 1.1 million barrels per day from the 2019 level. According to calculations based on OPEC data, the market demand for OPEC crude oil in 2020 is 70,000 barrels per day lower than the organization’s crude oil production in October. Therefore, unless the OPEC policy meeting in December decides to expand production cuts, OPEC itself will have a supply next year. A surplus situation.
However, in the process of formulating OPEC’s follow-up production reduction plan, the stance of Russia, one of the major oil-producing countries, is particularly important. When the market generally expected OPEC to expand production cuts, Russia expressed its unwillingness to expand production cuts. The reason for this is that However, in the cold winter, it is difficult for Russia to take the initiative to expand production cuts. This news once dampened the confidence of crude oil bulls. Not only that, Russia’s production in November has increased to 11.25 million barrels per day, once again failing to meet its production reduction commitments. According to calculations based on data from the production reduction agreement, in order to fully fulfill its production reduction commitments, Russian production must drop to 11.17-11.18 million barrels per day.
However, according to the latest developments, Russia’s attitude has relaxed somewhat regarding the follow-up implementation of the production reduction plan. Russian President Vladimir Putin believes that only the joint efforts of crude oil producers can stabilize the market. U.S. shale oil production Having already reached its peak, and without seizing Russia’s share of the global energy market, there is no need to increase supply in the crude oil market. Russia and OPEC have certain differences in some unimportant areas, but overall, they have a common task, which is to maintain balance in the crude oil market.
On December 5, OPEC will hold a meeting at its headquarters in Vienna, followed by OPEC+ talks with other oil-producing countries led by Russia. According to OPEC sources, there are two main options so far: either meet in December and extend the current production reduction plan until June; or postpone the decision to early next year and meet before March to see the market situation, and then extend the production cuts until the middle of next year. As Russia has loosened its stance on extending production cuts, the market expects that OPEC is likely to reach an agreement to extend production cuts in December. </p
