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As top officials from OPEC countries start to arrive in Vienna for this week’s OPEC+ meeting, OPEC’s top producer Saudi Arabia is pushing for a huge cut of more than 1 million bpd, while restive cartel producer Libya, which has lost 1 million bpd due to the port blockade, thinks that there’s no need for additional cuts on top of that outage.
Saudi Arabia wants the OPEC+ coalition to agree to a collective cut of more than 1 million bpd, delegates told Bloomberg on Wednesday.
On Tuesday, the Joint Technical Committee of the OPEC+ group, meeting before the regular OPEC meeting, considered bigger oil production cuts—between 600,000 bpd and 1 million bpd, and ended up recommending additional cuts of at least 600,000 bpd.
But the head of Libya’s National Oil Corporation (NOC), Mustafa Sanalla, told S&P Global Platts on Wednesday that additional deeper cuts were “not logical” and that the 1 million bpd outage in Libya was “enough”.
“I think there is no need to reduce because they’ve already now lost 1 million b/d,” Sanalla said, as carried by Platts.
Some analysts have warned in the past weeks that the OPEC+ decision is being complicated not only by the uncertainty regarding the recovery of Chinese and global oil demand, but also by the Libyan outage with uncertain timelines as to when the country could return 1 million bpd to the market.
Meanwhile, Iran’s Oil Minister Bijan Zangeneh told reporters in Vienna that there is an oversupply on the market and “it’s necessary that OPEC and non-OPEC do something for the balance in the market,” Iran’s oil ministry’s news service Shana reported.
The partners need to cut at least 500,000 bpd of their production, Zangeneh said, noting that in his opinion, “the Russians would resist until the last moment not to lower their output.”
This weekend Russian President Vladimir Putin suggested that Moscow would continue to play ball and cooperate with OPEC, although it sees current oil prices as “acceptable.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
The chairman of Libya’s National Oil Corporation (NOC), Mustafa Sanalla, said that additional deeper cuts were “not logical” with the loss of 1 million barrels a day (mbd) from Libya's production. He was echoing President Putin who said two days ago that deeper cuts while the Coronavirus outbreak is going on will not help oil prices.
And with OPEC’s oil production diving to a 10-year low at 27.84 mbd, I am very suspicious of calls by the likes of the International Energy (IEA) for OPEC to deepen the cuts. These calls aren’t motivated by their care for the welfare of OPEC members but by their own political agenda. For them, cutting more of OPEC’s production will lead to a reduction of its share in the global oil market and a weakening of its influence.
If the likes of IEA really care about the glut in the global oil market and oil prices, why don’t they ask the United States to cut 1 mbd from its production. After all, the US Energy Information Administration (EIA) keeps hyping that US oil production in 2020 will be higher than 13.0 mbd. It will be a good test for such claims.
I am on record having been repeatedly saying in recent times that any new cuts or a deepening of existing cuts by OPEC+ is oil down the drain while the outbreak is still going on. They will only lead to a loss of market share by OPEC and a weakening of its influence in the oil market.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London