Azerbaijan: OPEC+ meeting delayed to April 9 from Monday

MOSCOW/PETROPAVLOVSK-KAMCHATSKY/DOHA/WASHINGTON/BAKU, Apr 4 (PRIME) -- A meeting of OPEC+ states to discuss balancing the market was postponed to Thursday from Monday, adviser to Azerbaijan’s energy minister Zamina Aliyeva said on April 4.

The meeting was shifted to April 4,” she told PRIME.

President Vladimir Putin said late on April 3 at a government meeting that Russia is ready to work with Saudi Arabia and the U.S. on joint efforts to balance the global oil market,.

“I would like to say that Russia thinks it is vital to join the efforts. As I said, we weren’t the ones who initiated the disruption of the OPEC+ deal. And we are ready for agreements with the partners under the OPEC+ mechanism, and we are ready to work with the U.S. on this issue. I think that we have to join forces to balance the market and reduce production as a result of these coordinated efforts,” he said.

Preliminary estimates show that the joint output reduction may amount to about 10 million barrels a day or more, but it can only be done through a partnership deal, he said.

“Of course, it should be a partnership. And when I speak about partnership cooperation, I mean that everyone understands that this is about contraction from the production level that was before the crisis, this is about production of the first quarter of the current year,” he said.

Moscow is in contact with Saudi Arabia and the U.S., and everyone is interested in coordinated efforts to stabilize the market, he said.

The global oil industry may lack oil in the future due to system-wide problems. “It is obvious that the global oil sector that has system-wide problems today may have a deficit of resources at first and of oil after that in the future when demand grows, which is inevitable as demand will recover inevitably,” he said.

The situation may also result in high technological and environmental risks. The coronavirus pandemic has hurt the entire global economy triggering a slump of demand from the major energy consumers like the transport, and industry.

“This situation not only has the most negative impact on the financial and economic stability of the oil industry in the world, it disrupts investment programs, it may hurt jobs as well. But another concerning factor is that it may turn into technological and ecological risks as well. We should not forget about it,” he said.

It was never Russia’s goal to make oil prices too low or too high. The comfortable price for Russia is U.S. $42 per barrel, on which is has based its budget. One of the reasons that oil prices fell so low is that Riyadh withdrew from the OPEC+ deal, raised its own production, and offered discounts. This looks like Saudi Arabia tried to eliminate competition in the form of shale oil producers, he said, adding that Moscow always wanted long-term stability for the market.

Energy Minister Alexander Novak said that the ministers of OPEC+ countries preliminarily scheduled a conference call to discuss the oil market situation for Monday. At the same time, the largest producers of oil, including the U.S., should become the key partners in the market balancing, he said.

Novak also said that demand for oil had contracted at about 10–15 million barrels per day as of April 3, and can fall by 20 million barrels a day, or about 20% of the global oil output soon. It is necessary to reduce production by 10 million barrels a day for several consecutive months.

There is little room left in oil storages in the world, overproduction allows oil companies to pump oil into the storages or tankers for only one and a half or two more months, and then all of them will be full, he said.

Complete overstocking of the oil market may result in unpredictable consequences, including an even deeper contraction of prices. Unilateral decisions of some countries to oversupply the market continue to hurt the prices. Some countries are raising their output as they previously lost their market share due to higher shale oil production in the U.S., so coordinated actions of all countries are vital to prevent that, and all top producers of oil should unite, Novak said.

Russia understands legislative restrictions in the U.S. regarding oil output reductions, but all oil producers should show flexibility now, Novak said. 

Lukoil CEO Vagit Alekperov said that Russian oil companies agreed with the Energy Ministry to start negotiations under the OPEC+ format, and he hoped that the participants of the meeting would work out a level of reduction. Russia will not raise its oil production while negotiations are going on, he said.

RESPONSES

Saudi Arabian Foreign Minister Faisal bin Farhan Al Saud said on his Twitter page on April 4 that statements about the country’s decision to fight with producers of shale oil are incorrect.

“The foreign minister says that the statement attributed to Russian Federation President Vladimir Putin reported by mass media is that withdrawal of the kingdom from the OPEC+ agreement and its wish to do away with producers of shale oil are incorrect,” he said.

Saudi Arabia wanted to balance the market with a deeper reduction cut, which is also in Russia’s interests. The Kingdom expects Russia and other OPEC+ participants, as well as other countries, to make a fair decision that would restore balance on the oil market.

Saudi Energy Minister Search Results Abdulaziz bin Salman Al Saud told local news agency ASPA that information that Saudi Arabia rejected prolongation of the OPEC+ deal and made other steps that had a negative impact on the market are incorrect. It was Russia who rejected the initiative, which resulted in disputes, he said.

It is also surprising to hear that Saudi Arabia wants to kill the U.S. shale oil industry, as the kingdom is one of the major investors in it, he added.

U.S. President Donald Trump said in a news conference that he might introduce import duties on oil if he sees unfair games.

“I would use tariffs if I have to. I don’t think I’m going to have to. We want to save a great industry. If they don’t get along, I would do that, yeah, I would do tariffs, very substantial tariffs,” he said.

Russian ambassador to Venezuela Sergei Melik-Bagdasarov told PRIME separately that Moscow was in a working contact with Caracas regarding cooperation under the OPEC+ deal.

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