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Is There Really An Oil Shortage?

Some analysts have argued we…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Non-OPEC Producers To Cut An Additional 600,000 Bpd Next Week?

OPEC will discuss and possibly finalize a deal with producers outside the cartel to reduce global crude oil supply on December 10 in Russia’s capital Moscow, Reuters reported on Friday, citing two OPEC sources.

Earlier reports had put the date and place of the OPEC-non-OPEC meeting for December 9 in Doha, Qatar.

When OPEC said on Wednesday it agreed to cut the cartel’s total production to 32.5 million bpd, effective January, it hinged the deal on persuading non-OPEC producers to cut around 600,000 bpd.

Russia, which had previously said it would agree to a freeze at current levels, has promised to shave 300,000 bpd off its production, which, it emerged today, hit a high of 11.21 million bpd in November. Deputy energy minister Kirill Molodtsov said Russia would use the November figures in “OPEC agreements”.

His boss, energy minister Alexander Novak said on Thursday that all Russian oil companies are on board with the 300,000-bpd cut.

If Russia sticks to its pledge, the other non-OPEC producers would have to distribute among themselves the remaining 300,000-bpd cut that OPEC is asking for.

Novak said yesterday that other non-OPEC nations, including Azerbaijan, Kazakhstan, Mexico, Oman, and Bahrain, were also ready to join in the cut.

Welcoming the OPEC deal, Mexico said on Wednesday that it would keep its 2017 production target at 1.944 million barrels per day, as set out in state oil company Pemex’s plans, and lower than the expected 2.159 million bpd output for the end of this year. This reduction would help to stabilize the crude oil market and is mostly the result of the natural decline of Mexico’s oil fields, which started in 2004, the country’s energy department said.

Then, it’s Oman that had said weeks before the OPEC meeting that it was ready to cut by 5-10 percent if the cartel agreed to a deal. Oman’s crude oil production is expected to average more than 1 million barrels per day this year for the first time ever. Related: Private Equity Hunting For Oil & Gas Assets In South-East Asia

Kazakhstan, for its part, said on Friday that it supports “the global efforts to freeze oil production”. Kazakhstan will announce its position on the volume of oil production after the meeting of the OPEC and non-OPEC nations, its energy ministry said in a brief statement.

Azerbaijan supports any decision towards stabilizing oil prices in the world market, Azeri media report today.

“It is widely known that President of the Republic of Azerbaijan Ilham Aliyev unilaterally declared that Azerbaijan will not increase oil production and export. We say once again that Azerbaijan has no intention to take measures towards rise of oil production,” Energy Minister Natig Aliyev said, as quoted by Azertag.

“Azerbaijan is ready to accept proposals and make its contribution to the process of raising oil price,” the minister added.

According to Bloomberg News’ Will Kennedy, Mexico and Azerbaijan have many ageing fields and their production would fall naturally anyway. OPEC may use this natural decline and claim it as a cut when it actually isn’t, Kennedy said.

By Tsvetana Paraskova for Oilprice.com

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  • jman57 on December 02 2016 said:
    Cutting production to account for decreased Winter demand (if they don't cheat) is not a cut that will raise prices. It may just keep prices from going very low like the $20 range. Of course that is unless there is a market correction like February of 2016 when oil hit $25. Then what will OPEC do? Oil prices nowadays are dependent on trader perceptions more than anything. Those can change with any wind, not just the hot air coming from OPEC and Russia.

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