Media reported that the Ministry of Finance advised not to renew the agreement on oil from OPEC

© AP Photo / Hasan JamaliДобыча oil. Archival photoMedia reported that the Ministry of Finance advised not to renew the agreement on oil from OPEC© AP Photo / Hasan Jamali

Experts of the Ministry of Finance do not recommend to renew the agreement with OPEC to reduce production, as this may lead to increased production of shale oil and the collapse in oil prices to $ 30 per barrel, the newspaper «Vedomosti».

Representatives of oil-producing countries in OPEC and outside of the organization, will discuss on Thursday in Vienna a recommendation to extend the agreement to reduce oil production for another nine months — until April 1, 2018. Reduction of oil production is expected to remain unchanged.

30 November OPEC agreed in Vienna on the reduction of its production to 1.2 million barrels a day from October level. 11 non-OPEC countries, 10 Dec agreed to reduce its production a total of 558 thousand barrels per day, including RF — 300 thousand. The agreement was concluded for the first half of 2017 with possibility of extension.

The Ministry of energy supports the extension of the agreement for nine months. And the experts of the Ministry of Finance does not share this position, the newspaper said. In the presentation of the budget policy Department and strategic planning of the Ministry of Finance, which reviewed the newspaper says that the Covenant of producers does not make sense, extending it for the second half of 2017 will reduce excess stocks of oil in OECD countries is 250 million barrels. As a result, demand will exceed supply by 1.9 million barrels per day that will support the «shale revolution 2.0».

According to experts of the Ministry of Finance, the payback for this will be significant surplus (about 0.7 million barrels per day) in the first half of 2018, the accumulation of reserves and the collapse of oil prices. Later, awareness of this can lead to excessive failure price, around 30 dollars, experts predict. Balancing supply and demand it would be better to have prices 40 dollars per barrel, but it would not have led to a reduction in excess reserves, they say.

In the US, the drilling speed and efficiency of the current mean growth rate of production at 1.5 million barrels per day (crude oil plus condensate) that outpaces the growth rate of world consumption (1.3 million barrels per day), the experts of the Ministry of Finance. Maintaining the current pace of commissioning of drilling in July will bring the rate of production growth to 2 million barrels a day, they warn.

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