OPEC meeting imminent Russia's production cuts are fuzzy, oi
2019-11-29 16:22 from：CAPSTONE author：Jack
Capstone Online CFD Trading Report: On Thursday (November 28), the international oil price continued its downward trend. In addition to the rise in US crude oil inventories, it also had a certain relationship with Russia's inactive attitude towards reducing production. It said that at the OPEC meeting next month, Russia may ask OPEC to adjust its method of calculating the country ’s oil production. For three years, OPEC and non-OPEC countries have been limiting oil production to balance the market and support oil prices, but Russia's method of calculating production is different from other countries. Unlike Saudi Arabia and other OPEC oil-producing countries, Russia has always included condensate in its crude oil production data, a high-quality light crude oil that is mainly extracted during natural gas production.
In the past, this did not cause any problems for Moscow, but as Russia continued to put into operation new gas fields in the Arctic and Eastern Siberia, and opened a new natural gas pipeline to China, its condensate production continued to rise. Russia and OPEC say that this has caused Russia's oil production to exceed the production quotas stipulated in OPEC and non-OPEC oil-producing countries. Russia has been trying to avoid this situation. A person familiar with Russia's position stated that Russia would definitely submit the condensate issue to the December meeting for discussion because the country's condensate production will continue to increase.
The above did not disclose whether Russia will reach other agreements with OPEC on the condition that OPEC agrees to adjust Russia's production quotas, such as extending production cuts to next year or further increasing output reduction. However, controversy over how output is calculated may complicate meetings between OPEC and its allies. The OPEC + meeting will be held concurrently with the initial public offering (IPO) of Saudi National Petroleum Corporation (Saudi Aramco).
Another person familiar with Russia ’s position stated that the idea of excluding condensate when calculating oil production was due to the increase in natural gas production in Russia, which in turn led to an increase in the production of condensate by-products in the natural gas production process. Russia will definitely raise this issue at the meeting. Russian Energy Minister Novak said on Wednesday that the OPEC + meeting may discuss adjusting oil production quotas.
As the amount of natural gas supplied by Russian gas to European customers this winter is close to the highest level in history, its condensate production has also increased. Another said that it was difficult to increase natural gas production without increasing condensate production. So in essence, condensate production is determined by natural gas production, not by the petroleum industry. If you try to reduce condensate production while increasing natural gas production, this will have an adverse effect on the oil field.
2017Since 2017, Russia has been working with OPEC to reduce crude oil production to help support oil prices at about $ 50-70 per barrel, despite a significant increase in US production during the period. In 2019, Russia agreed to reduce its oil production by 228,000 barrels per day to about 11.18 million barrels per day. The overall reduction in OPEC + output was 1.2 million barrels per day, equivalent to 1.2% of global demand.
However, according to calculations, Russia ’s average output this year is 11.25 million barrels per day, which exceeds its production quota by about 70,000 barrels per day. Russian energy data shows that the excess output is mainly related to condensate. From January to October 2019, condensate output increased by 4% to about 77,000 barrels per day. In contrast, the UAE's condensate production is about 700,000 barrels per day, while Saudi Arabia and Nigeria produce about 400,000 barrels per day.
As output from non-OPEC countries increases, OPEC and its allies have been insisting on reducing output, and the global oil market has continued to be in an oversupply state. Considering the threat of further decline in demand next year, in order to maintain the stability of the oil market, the OPEC meeting should extend the production reduction agreement until June 2020. However, if Russia's attitude of reducing production is still not positive or the idea of excluding condensate when calculating oil production is expected to lead to further declines in oil prices.
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