On July 1 local time, the Organization of Petroleum Exporting Countries (OPEC) held the 15th Joint Ministerial Supervision Committee (JMMC) meeting and the 176th Plenary Session at its headquarters in Vienna, summarizing and evaluating the effect of the six-month production cut order, and decided to postpone the production cut order until March 31 next year.
According to the schedule, the 6th Ministerial Meeting of OPEC and non-OPEC oil-producing countries will be held today. At that time, the specific quota and duration of the new production cut order will be finalized, and OPEC and non-OPEC oil-producing countries are expected to sign a long-term "Charter of Cooperation".
html International oil prices fluctuated sharply on 1st, with the main contract of WTI crude oil rising 3.5% at the beginning of the session, while the gains shrunk to 0.3% at the end of the trading session of the European trading session that day.ANZ senior commodity strategist Daniel Hynes said that investors still expressed concerns about uncertainty about the future economic outlook. OPEC's extension of the production cut agreement was expected, and the most important thing was to stabilize oil prices and market expectations.
OPEC's influence on international oil prices has weakened?
In order to stabilize the continued panic decline in international oil prices, at the 175th OPEC Conference held in early December last year, oil-producing countries decided to reach another production cut agreement after two years, that is, to reduce production by 1.2 million barrels per day from January this year, valid until June 30.
html Since early May, changes in the global economic situation and trade situation have once again put pressure on the oil market, which naturally put many oil-producing countries under tremendous pressure. Therefore, extending production cuts has made stabilizing oil prices the main tone of this OPEC meeting.OPEC's latest monthly report shows that the unstable trade situation is hurting global crude oil demand, and the outlook for crude oil demand in the second half of the year faces significant downward risks. Under the influence of Iran's export restrictions and production cut agreements, OPEC crude oil output fell to a five-year low in May, at 29.88 million barrels per day.
At the G20 Osaka summit held last weekend, Russian President Putin's meeting with Saudi Crown Prince Mohammed bin Salman attracted everyone's attention. Putin said that Russia and Saudi Arabia reached an agreement to support the extension of the production cut order by 6 to 9 months. Currently, Russia and Saudi Arabia are the second and third largest oil producers in the world, and the statements of the two countries have had a huge impact on the OPEC Conference.
The outside world is also concerned about the attitude of Iran, the third largest oil producer in OPEC. Iran's crude oil exports have dropped sharply from its peak of 2.5 million barrels per day in April last year to 300,000 barrels per day due to U.S. sanctions. Iran and Saudi Arabia had huge differences on the issue of production cuts, but this time the two sides have a consistent position. Iranian oil minister Bijan Zanganeh said he had no objection to the delayed production cut order, which made it natural for all parties to reach an agreement. The conference statement released by the official website of
OPEC stated that the global economy is facing downward pressure, mainly facing uncertainty from the trade situation and geopolitical aspects. Since the plenary meeting in December last year, global oil demand growth has been lowered to 1.14 million barrels per day, and oil supply from non-OPEC oil-producing countries is expected to grow at a strong rate of 2.14 million barrels per day this year. The meeting decided to postpone the production cut order by 9 months, from July 1, 2019 to March 31, 2020. Members will continue to focus on fundamentals and strive to establish a stable and balanced oil market that is in line with the multi-party interests of producers, consumers and the healthy global economy.
statement also praised the key role played by non-OPEC countries in the Declaration of Cooperation. Under the framework of production cuts, countries' implementation rates reached an all-time high. OPEC+ oil-producing countries' implementation rate in May reached 163%.
At the same time, the meeting confirmed that the term of the current OPEC Secretary-General Mohammad Sanusi Barkindo will be extended for three years until August 1, 2022. The next OPEC conference will be held in Vienna on December 5.
html International oil prices fluctuated sharply on 1st. Some analysts believe that although production cuts can support oil prices in the short term, OPEC also faces the risk of market share being eroded by competitors. The latest monthly reports ofOPEC and International Energy Agency (IEA) show that the growth rate of non-OPEC oil-producing domestic production has steadily increased. Among them, the US crude oil production has stabilized above 12 million barrels/day this year, with a maximum peak of 12.4 million barrels/day, and commercial crude oil inventories rose to 468 million barrels, a two-year high.With the upgrading of shale oil technology and the improvement of pipeline laying in the production area, U.S. crude oil production capacity is expected to further increase in the future. OPEC's share of global crude oil production may further decline in the future, and this is the first time since 1991 to below 30%.
Iran warned not to let OPEC go to an end
Judging from the recent OPEC conferences, Russia and Saudi Arabia have almost completely dominated the final resolution results. Therefore, Saudi Arabia and Russia's statements during the G20 period also aroused the outside world's doubts about OPEC's "modification" discussion of the production cut agenda.
UAE Minister of Energy and Industry Al-Mazrouei said that the current market environment needs to stabilize oil prices by maintaining production cuts. "It is important for OPEC to negotiate with the largest oil-producing countries in non-OPEC. In fact, every member of the OPEC has the right to vote against it, and everyone's opinions are important," said Mazruy.
Iran expressed its concerns. Iranian oil minister Zangane said that it is important that OPEC needs to maintain its independence and authority, and the "unilateralism" behavior among some oil-producing countries may trigger division within the organization. He said: "Iran will not withdraw from OPEC, but if this situation continues, OPEC will perish." On December 3 last year, , Qatar announced its withdrawal from OPEC, giving the reason that it hopes to focus on the field of natural gas development in the future, but the outside world generally speculates that the years of discord between Qatar and Saudi Arabia is the main reason for its "withdrawal".
Zangane further expressed his opposition to reaching a long-term Charter of Cooperation with non-OPEC oil-producing countries, saying that without solidarity within OPEC, cooperation between OPEC members and non-OPEC oil-producing countries is meaningless. Iran supports cooperation with oil exporters outside OPEC, but if some OPEC members have tense relations with other members such as Iran, there is no room for cooperation in the future.
Royal Bank of Canada RBC's global commodity strategy head, said that Iran urgently needs more oil revenue, that is, higher oil prices, so they will agree to extend the production cuts. However, there will be no signs of easing the tension between Iran and Saudi Arabia in the short term, which also leaves a large gap within OPEC. Earlier, Iranian officials accused Saudi Arabia of supporting U.S. sanctions on Iran and Venezuela.
