This article was first published on "Star News Agency", with the main author staying in the constancy, and the author authorized to push
Comrades asked to talk about the issue of OPEC production reduction and arrangements.
At present, our media's interpretation of this production cut is generally focused on the perspective of the contradiction between Saudi Arabia and the United States, believing that this is the slap of Saudi Arabia in the face by the United States.
is correct to say this. After all, Biden just went to promote production increase, and he got a result of a reduction in production when he turned around. He was indeed severely educated.
But if you only stay at this level, it will not be comprehensive.
Because this action was made by OPEC+ collectively, not by the Saudis.
Everyone should also notice that there is a + sign behind OPEC in the news. What does the plus sign mean by
?
means that this production cut is an expanded OPEC consortium, that is, the decision made by OPEC , other major oil exporters , and .
Currently, the composition of OPEC+ is as follows:
- OPEC member states: Iran , Iraq , Kuwait , Saudi Arabia, Venezuela (Five Founding Countries), Libya , UAE, Algeria , Nigeria , Gabon , Angola , Equatorial Guinea and Congo ;
- Oil-producing countries of non-OPEC members : Russia, Malaysia , Mexico , Kazakhstan , Sudan , Azerbaijan , Bahrain , Brunei , Oman , South Sudan .
How did this OPEC+ come about? What is the difference between it and OPEC?
This is the first question we are going to sort out today.
has a 62-year history and OPEC. OPEC+ has only appeared in recent years.
Although it does not include the United States, it is a product of the unexpected succession of the US shale revolution:
2003-2005, the United States made major breakthroughs in hydraulic fracturing and horizontal drilling and mining technology, making the large-scale commercial development of shale gas and shale oil a reality.
So in August 2005, the US Congress passed the " Oil Shale , Tar Sands and Other Strategic Unconventional Fuels Act" and the "Energy Policy Act" bill, elevating shale oil and gas to the status of strategic resources, requiring the government to spare no effort to develop such unconventional energy, "to reduce the United States' growing dependence on political and economically unstable sources of foreign oil imports."
Its goal is to increase the primary energy self-sufficiency rate in the United States to nearly 90% by 2035.
Since then, the United States has set off a huge boom in production capacity.
In 2009, the United States' natural gas production exceeded Russia, becoming the world's largest natural gas producer;
In 2014, the United States' oil production approached Russia and Saudi Arabia, and its natural gas production was far ahead, becoming the largest energy producer again after more than half a century.
In 2014, the United States became the world's largest energy producer again
Faced with the rapid increase in the United States' oil and gas production, in order to defend its international market share, since 2013, OPEC and Russia have all started a confrontation mode and opened up supply of oil. This massive supply of the three major energy sources quickly caused serious oversupply in the international crude oil market, so the price began to plummet from the high of US$110 per barrel in 2013.
When the battle situation became fierce, international oil prices fell below $30 per barrel at the beginning of the year, and nearly 30% of the price fell within a month.
share battle to this point, American oil companies first fell down and withdrew from the competition, while Saudi Arabia and Russia are becoming more and more braver, and they are very stance to stop after killing each other.
Seeing that the boss is in a strong sense of fighting, OPEC and non-OPEC second-tier oil producers have begun to get stuck. These countries have a weak foundation and have lived on selling oil. After such a round of tossing, deficits, debts and inflation crises have erupted one after another, causing people to go out to protest every day and government officials to suffer.
So both sides began to persuade the two bigwigs to lead everyone to make peace as soon as possible and discuss countermeasures together.
Because they belong to the developing countries of and have similar strategic interests, in December 2016, OPEC member states and 10 non-OPEC oil-producing countries led by Russia decided to turn enemies into friends. After difficult negotiations, the two sides reached a production restriction agreement, and "OPEC+" was initially formed.
On July 2, 2019, the two sides signed the "Cooperation Charter", and the "OPEC+" cooperation mechanism was officially established.
Some members may ask:
"Since you need to adjust the output, why not bring the United States to adjust it?"
The reason is very simple, just like asking the Three Kingdoms Sun Liu Alliance Why don't you look for Cao Cao A truth:
Cao Cao wields the emperor to command the princes, and the goal is to eliminate local separatist regimes and unify the world. Once you cooperate with him, you will only be gradually eroded and finally be eaten up. Not to mention independence, even survival will become a problem.
By the same token, the United States is not only the largest energy producer, but also one of the largest energy consumers of . This dual characteristic determines one thing: the interests of
and the interests of the United States are fundamentally opposite.
Once the OPEC and American alliance , it means that the United States can theoretically build a cycle that is beneficial to itself:
When the oil price is low, it can use the profits from the consumer side to subsidize the production side;
When the oil price is high, it can use the profits from the production side to subsidize the consumer side.
At that time, the United States only needs to maintain a moderate price of US$65-75 per barrel for a long time, so that shale oil companies can achieve small profits in terms of insufficient pressure on the consumer side and survive first.
Once you survive without any fear, these companies can continuously reduce costs through scale effect and technological improvements, while expanding their production capacity.
Once the development costs of American oil companies are successfully reduced and their production capacity is greatly improved, it can be invincible in future competition.
By then, no matter it was OPEC or other developing energy exporters, they could only be mermaid:
Because the United States has something in its hands, called economic hegemony, it never stings with using this hegemony and using various non-market behaviors to sanction, block, and suppress competitors.
Once the future rebellion becomes enemies, the United States can at any time label these competitors as strange labels such as "dictatorship", "dictatorship", and "inhumanity", and crush the companies in these countries in one fell swoop.
even if necessary, it can also use long arm to manage to arrest people across countries, sanction third parties, etc. to ensure that no one in the market dares to say anything.
Therefore, OPEC and the United States join forces mean cultivating an invincible and without bottom line, which is a typical example of drinking poison to quench thirst and destroying the future.
No one wants this to happen to them.
years of experience tells these oil-producing countries that when dealing with the United States, they must not have illusions.
And the unruly image of the United States is the underlying reason that really hinders oil-producing countries from joining forces with it.
From the game process established by OPEC+ above, we can see that this mechanism is the result of developing the strategy of middle-producing oil countries, hedging . Its core concept is to jointly regulate production and strengthen the regulation of international crude oil supply, so as to achieve the purpose of affecting oil prices and ensuring returns.
, the organizational form of group warming, determines that there is an important difference between OPEC and OPEC+:
The difference 1. Compared with OPEC, OPEC+ is a relatively loose consortium.
It is obvious that the cooperation between Saudi Arabia and Russia is the key to OPEC+'s success, but in fact, the two countries also have profound differences, which makes the OPEC+ mechanism unable to truly become a mandatory and binding monopoly group.
For example, in March 2020, due to the decline in global crude oil demand due to the epidemic, Saudi Arabia and Russia broke out in a large-scale supply war and price war.
In April, Saudi Arabia wanted to promote OPEC+ production cuts to to protect the price of , but Russia quit, believing that it was Saudi Arabia's unauthorized increase in production a month ago that led to the decline in oil prices. The two sides once cancelled the OPEC+ meeting, which led to the direct collapse of international oil prices. Later, the leaders spoke directly on the phone and finally reached a production cut agreement. The relatively loose structure of
also adds uncertainty to the future operation of OPEC+.
Difference 2. Compared with OPEC, OPEC+’s political considerations are more complex. Among the OPEC member countries, Saudi Arabia, Qatar , Kuwait, the United Arab Emirates, Nigeria and other major countries have good traditional relations with the West, so OPEC's foreign relations are relatively stable.
At the same time, OPEC member countries are relatively concentrated in their regions, and the external factors that need to be considered are relatively simple, so the issue is relatively simple, mainly a supply and demand-price issue.
Once OPEC+, because they joined Russia, which is also dominant and does not deal with the West, and their members are widely distributed in Asia, Africa and Latin America, the external factors they face are much more complicated.
Therefore, when making collective decisions, we must fully consider issues such as the international political situation, balance of relations among countries, and regional interests, so that the issue will be raised to the political-energy issue.
Difference 3. Compared with OPEC, OPEC+'s prospects are even more unclear.
To evaluate the prospects of a mechanism, in addition to analyzing the internal organizational structure, it also needs to analyze its external environment.
Currently, one of the world's largest governance issues is to deal with climate warming. Major industrial countries are deploying the carbon peak and carbon neutrality agenda. This trend is obviously not good for oil-producing countries.
However, in the face of such a general environment, the development paths chosen by oil-producing countries are different. Some choose to keep pace with the times and actively transform, some keep waiting and looking at each step, while others are unable to do anything and can only follow the old ways.
In this case, the more countries and the wider the territory in the consortium, the greater the differences in paths, which is also the restriction of OPEC+'s efforts.
Therefore, to sum up, OPEC+ is an international industrial consortium that is far more complex than OPEC. Since the internal mechanism has not been truly straightened out and the external environment is different, the development trend can only depend on how the parties concerned coordinate internally and externally.
This determines that the decisions it makes now are more temporary and resilient tactical decisions, rather than global and long-term strategic decisions.
This is a review of our first problem today, and it is also our interpretation that this production reduction action is a basic understanding.
So, let’s continue to sort out the second question today:
OPEC+ Why should we reduce production this time?
Is this production cut really a blow to the United States?
is not actually the case. It is too overestimated that the impact of the United States is
This production cut is actually just the development of the established plan. As for the impact of the United States, it can only be said to be collateral damage.
Yes, things are not as conflicting and dramatic as common interpretations. It is just a follow-up to the ultra-long-term production cut agreement reached by OPEC+ the previous year, and is more of an economic consideration.
First talk about how this ultra-long-term production cut agreement came about:
In April 2020, the global epidemic began to break out, and the economic outlook of major oil consumer countries was quickly looked down on, so oil prices plummeted -
fell from nearly $60 per barrel at the beginning of the year to early 20 in April in just over two months.
In this case, in order to reduce the impact of the decline in oil prices on oil revenue, OPEC+ announced the conclusion of the following agreement after multiple internal rounds of negotiations:
has carried out a two-month first round of production cuts starting from May 1, 2020, with a production cut of 9.7 million barrels per day (1 ton is about 7.33 barrels);
has reduced production by 8 million barrels per day from July 2020 to December;
has reduced production by 6 million barrels per day from January 2021 to April 2022.
from 9.7 million barrels to 8 million barrels and then to 6 million barrels. Is this number superimposed one by one?
is actually not, but decreasing.
It means that all three stages are based on the production capacity of OPEC+ agreed upon by the agreement, and then —
The first stage significantly reduced the production by 9.7 million barrels per day;
The second stage reduced the production scale of , and only reduced the production by 8 million barrels per day;
The third stage reduced the production scale of , and only reduced the production by 6 million barrels per day.
Because according to the forecast at that time, the world economy should basically recover by April 2022.
So, is this production cut large?
is very large, because the global oil production in 2019 was about 94.92 million barrels per day, and 9.7 million barrels is equivalent to a direct explosion of 10%.
So as soon as the message came out, the price immediately flew up again.
This year, although the world's demand has generally recovered, since the production cut agreement has expired, production capacity has also recovered rapidly from the April period this year (the blue line in the figure below climbed rapidly from the second quarter of 2022), and as of the end of September, it has exceeded demand a lot (the blue line in the red box in the figure below is higher than the brown line part).
Therefore, OPEC+ decided to cut production by 2 million barrels this time, and it is expected to drop from an average of 29.6 million barrels per day in September to an average of 28.6 million barrels per day. Why is
28.6 million barrels/day instead of 27.6 million barrels/day?
Because OPEC+ still has a problem, that is, due to insufficient investment, the production capacity has never reached the theoretical value. Once the production capacity does not reach the theoretical value, the actual reduction will naturally not be achieved, so it is expected to actually reduce by 1 million barrels.
market supply and demand, this is the most important consideration for OPEC+'s production cut this time, rather than planning a big chess or ruthless move.
Objectively speaking, the decision to reduce output under the condition of oversupply is understandable, and the output reduction itself accounts for only 1% of the global daily output, which is quite moderate.
However, with the intervention of the United States, things began to become complicated:
—It is obviously oversupply, and the United States also requires increased production;
—It is obviously a moderate reduction in production, but the United States is still extremely dissatisfied and criticized.
If OPEC+ cuts production because of the market environment, then why is the US government asking for increased production?
is definitely not because of global demand, because there is already an oversupply. It is obvious that it is to curb domestic inflation in the midterm elections, exchange votes, and also to amplify joint price limit actions to further crack down on the Russian economy to reduce pressure in Ukraine.In comparison with
, isn't it clear who actually politicized the energy problem?
But the US government not only wants to make a fuss, but also in turn accused Saudi Arabia of politicizing the problem. What is this not a turning point?
What is self-righteousness, hegemony , the United States is accusing OPEC.
Therefore, the Saudi government will come out to clarify and firmly reject this stigma. At the same time, it once again emphasizes the strategic nature of Saudi-US relations, which means that I have taken care of you and restrained enough. You can't splash me with dirty water like this anymore.
responds quite rationally and concisely.
So, when we sort out this process, we can know that the fundamental cause of the matter is not the Saudi-US conflict, but the United States deliberately politicized economic issues in order to divert its responsibility for internal and diplomatic failures.
If our media also interprets the American idea and even adds fuel to the fire to render the plot of the Shama-US showdown, it is precisely helping the US government find excuses, which is not advisable.
or above is the answer to our second question today.
The third question is, why is it difficult for the United States to effectively counter? After the decision to reduce production was made, the US government can be said to be furious:
first its Secretary of State Blinken directly criticized OPEC for being "short-sighted and disappointing" and threatened that the Biden administration is reviewing "some response options" about US-Saudi relations.
Then White House spokesperson issued a statement accusing the decision of being a "huge mistake" and that "OPEC+ is clearly in line with Russia."
Finally, Biden came out and spoke out, saying that Saudi Arabia was "helping Russia do things" and that he was considering taking action to "make Saudi Arabia pay the price."
We often say that the essence of anger is dissatisfaction with one's own incompetence. The fundamental reason why the US government is so angry is that it does not have many economic options.
is the largest oil-producing country, but is unable to contain it in the face of such "blatant provocation"?
is true.
Originally, the most effective way to deal with production reduction is to increase production. If the United States can reduce OPEC+ and make up for as much as it can, it won’t take long for OPEC+ to fall into division.
But the problem is that the current space for increasing production in the United States is extremely limited.
This is mainly caused by two reasons:
The first reason is that the US shale oil and gas companies were injured in the 2016 century war and have not recovered yet.
, especially after the establishment of the OPEC+ system, the US shale oil and gas industry has completely stopped.
From 2015 to 2021, there were 274 oil and gas producers, 330 oil field services and midstream companies across the United States going bankrupt or filed for bankruptcy, with a total of more than 600 bankruptcies involving more than US$321 billion in debt, and extremely heavy losses.
The establishment of OPEC+ broke through the last psychological defense of American oil companies
How big is this violent injury left on Americans?
Let me put it this way. To this day, even though the oil price has stabilized at over $70, and even exceeded $110 this year, the US financial industry is not very brave enough to raise funds for surviving shale oil and gas companies, and the latter is also starting construction in fear, for fear of taking a big step again.
didn't expect that this kind of scrutiny caused them to suffer losses again:
originally had oil prices rise this year, and these companies that survived the disaster made a profit, but these companies were afraid of losing money before. The more they thought about it, the more they felt that the good days of this year were unreal. Then, they backhandedly hedged themselves to low oil prices:
data shows that US shale oil producers currently hedge 46% - that is, nearly half - of which 42% were at an average base price of $55 per barrel.
That is to say, these oil and gas are sold at a price of $55, and when the delivery period is delivered, if the market oil price is less than $55, they will make more profits. If the market oil price is higher than $55, the oil companies will lose room for profit.
From the perspective of the average market price in the second quarter, these oil companies lost an average of US$21 per barrel. If oil prices continue to rise this year, they will lose more.
, a mentality that would rather make less than lose more, is quite rare in the bloodthirsty business tradition in the United States, which shows how afraid they are of OPEC+.
So, now, unless the Biden administration can spread a lot of money and let these oil companies rush forward boldly, no one is willing to increase production urgently and grab food at the edge of OPEC+.
a few days ago Reuters also noticed this phenomenon and went to interview these oil companies. Several of the answers were intriguing:
CEO of Patterson-UTI, Texas, said: "For the reduction of OPEC+ production, I haven't heard of any production The dealer said, 'I want to seize the opportunity to fill this vacancy'. Now, in addition to the tension of labor and service , renting the top-notch drill rig will take at least six months of delivery time, so nothing can quickly improve ".
CEO of Anschutz Exploration, Colorado, said: "I don't expect any up and down changes in our position. Our lacks good drilling platform and workers , and the 2023 budget is close to completion, so it will not respond to OPEC+'s production cuts." "U.S. manufacturers will have a hard time increasing production before they get more funds, and OPEC will continue to control pricing," said the CEO of another Texas .
The title of Reuters' report is "Even if OPEC+ cuts production, US shale oil producers will stay on the sidelines."
people, money and materials are lacking. This is the current situation of shale oil companies that once served as the new force in the United States' energy industry.
This is the first reason for the limited capacity for increasing production in the United States.
The second reason is the Biden administration's energy policy.
will have to be thousands of words when it comes to expanding. Let’s focus on the petrochemical part, and other things such as clean energy and infrastructure part will be discussed in detail in the future if you have the opportunity. After the old man came to power, a major change in the US energy policy was to significantly elevate climate change to the national security strategy level and put forward the idea of using the Green New Deal as a framework for responding to climate challenges.
The core of its policy is to "build modern and sustainable infrastructure and equitable clean energy for the future." The concept of
is not particularly friendly to petroleum and petrochemical at first glance.
From the current perspective, the old man played the main restrictive card for petroleum and petrochemicals:
In January 2021, after taking office, the old man immediately signed a series of administrative orders, which clearly required the government's financial support for fossil fuels to be cancelled by 2022, and this part of the funds were used to reward the production of clean energy;
In the mining of fossil energy, he canceled the construction of the fourth phase of the " Gongxinshi " crude oil pipeline project, and strictly reviewed the existing federal oil and gas licenses and leasing, and suspended the approval of new public land or offshore water oil and gas leasing licenses.
. Regarding the Alaska oil extraction that Trump has always wanted to promote, the old man blocked the Arctic waters protection order, announcing that oil exploration and production will be prohibited in the Arctic National Wildlife Reserve and the offshore Arctic, and it is strictly forbidden to destroy the ecological environment of ecologically fragile areas.
, on the one hand, it supports clean energy, and on the other hand, it inhibits petrochemical energy. How do you make oil companies have the enthusiasm for production?
Therefore, the current production capacity of the United States is not that bad at OPEC+, but it is still a big step away from its pre-epidemic level.
You said, how should it fill the pit of 2 million barrels per day?
The above two reasons determine that it is difficult for the United States to effectively respond to OPEC+'s production cuts in economic means.
This is the answer to our third question today.
Does that mean that the United States has no way to take OPEC+?
of course not, it also has a special magic weapon: external tricks.
front-facing can't be done, it can get something else from under the table.
From the current perspective, it is possible to take action in Middle East directly put pressure on Saudi Arabia through issues such as Israel, Iran, Yemen , Qatar, and human rights. At the same time, it strives to differentiate small groups within OPEC+, such as attracting small countries to withdraw from unified actions through expansion of investment and other means, and putting pressure on major countries.
Therefore, when judging the future direction, we are likely to see a more unscrupulous United States performing on the world stage.
In terms of OPEC+, due to the three internal problems we pointed out (loose organization, complex politics, and different national paths), how to deal with the extreme suppression of the United States in the future is also a huge test.
Of course, we will definitely not sit idly by and watch the United States do whatever it takes.
After all, the Eurasian continent is our home court and our home. How can outsiders destroy it, right?
Finally, let’s say an interesting assumption:
If, with our help and coordination, OPEC+ will eventually develop in the direction of [Energy Central Bank], and influence the global energy industry through policies and expectations, and thus promote the global economy to develop in a more integrated, fair and stable direction, what do you think? If
is formed, then the US dollar is probably a very low-level choice for the settlement currency of the central bank .
Let's wait and see!
or above is a review of OPEC+'s production cuts.
. If we talk about chips in the next article, you can leave a message if you have any questions you want to know.
Seeing that the boss is in a strong sense of fighting, OPEC and non-OPEC second-tier oil producers have begun to get stuck. These countries have a weak foundation and have lived on selling oil. After such a round of tossing, deficits, debts and inflation crises have erupted one after another, causing people to go out to protest every day and government officials to suffer.
So both sides began to persuade the two bigwigs to lead everyone to make peace as soon as possible and discuss countermeasures together.
Because they belong to the developing countries of and have similar strategic interests, in December 2016, OPEC member states and 10 non-OPEC oil-producing countries led by Russia decided to turn enemies into friends. After difficult negotiations, the two sides reached a production restriction agreement, and "OPEC+" was initially formed.
On July 2, 2019, the two sides signed the "Cooperation Charter", and the "OPEC+" cooperation mechanism was officially established.
Some members may ask:
"Since you need to adjust the output, why not bring the United States to adjust it?"
The reason is very simple, just like asking the Three Kingdoms Sun Liu Alliance Why don't you look for Cao Cao A truth:
Cao Cao wields the emperor to command the princes, and the goal is to eliminate local separatist regimes and unify the world. Once you cooperate with him, you will only be gradually eroded and finally be eaten up. Not to mention independence, even survival will become a problem.
By the same token, the United States is not only the largest energy producer, but also one of the largest energy consumers of . This dual characteristic determines one thing: the interests of
and the interests of the United States are fundamentally opposite.
Once the OPEC and American alliance , it means that the United States can theoretically build a cycle that is beneficial to itself:
When the oil price is low, it can use the profits from the consumer side to subsidize the production side;
When the oil price is high, it can use the profits from the production side to subsidize the consumer side.
At that time, the United States only needs to maintain a moderate price of US$65-75 per barrel for a long time, so that shale oil companies can achieve small profits in terms of insufficient pressure on the consumer side and survive first.
Once you survive without any fear, these companies can continuously reduce costs through scale effect and technological improvements, while expanding their production capacity.
Once the development costs of American oil companies are successfully reduced and their production capacity is greatly improved, it can be invincible in future competition.
By then, no matter it was OPEC or other developing energy exporters, they could only be mermaid:
Because the United States has something in its hands, called economic hegemony, it never stings with using this hegemony and using various non-market behaviors to sanction, block, and suppress competitors.
Once the future rebellion becomes enemies, the United States can at any time label these competitors as strange labels such as "dictatorship", "dictatorship", and "inhumanity", and crush the companies in these countries in one fell swoop.
even if necessary, it can also use long arm to manage to arrest people across countries, sanction third parties, etc. to ensure that no one in the market dares to say anything.
Therefore, OPEC and the United States join forces mean cultivating an invincible and without bottom line, which is a typical example of drinking poison to quench thirst and destroying the future.
No one wants this to happen to them.
years of experience tells these oil-producing countries that when dealing with the United States, they must not have illusions.
And the unruly image of the United States is the underlying reason that really hinders oil-producing countries from joining forces with it.
From the game process established by OPEC+ above, we can see that this mechanism is the result of developing the strategy of middle-producing oil countries, hedging . Its core concept is to jointly regulate production and strengthen the regulation of international crude oil supply, so as to achieve the purpose of affecting oil prices and ensuring returns.
, the organizational form of group warming, determines that there is an important difference between OPEC and OPEC+:
The difference 1. Compared with OPEC, OPEC+ is a relatively loose consortium.
It is obvious that the cooperation between Saudi Arabia and Russia is the key to OPEC+'s success, but in fact, the two countries also have profound differences, which makes the OPEC+ mechanism unable to truly become a mandatory and binding monopoly group.
For example, in March 2020, due to the decline in global crude oil demand due to the epidemic, Saudi Arabia and Russia broke out in a large-scale supply war and price war.
In April, Saudi Arabia wanted to promote OPEC+ production cuts to to protect the price of , but Russia quit, believing that it was Saudi Arabia's unauthorized increase in production a month ago that led to the decline in oil prices. The two sides once cancelled the OPEC+ meeting, which led to the direct collapse of international oil prices. Later, the leaders spoke directly on the phone and finally reached a production cut agreement. The relatively loose structure of
also adds uncertainty to the future operation of OPEC+.
Difference 2. Compared with OPEC, OPEC+’s political considerations are more complex. Among the OPEC member countries, Saudi Arabia, Qatar , Kuwait, the United Arab Emirates, Nigeria and other major countries have good traditional relations with the West, so OPEC's foreign relations are relatively stable.
At the same time, OPEC member countries are relatively concentrated in their regions, and the external factors that need to be considered are relatively simple, so the issue is relatively simple, mainly a supply and demand-price issue.
Once OPEC+, because they joined Russia, which is also dominant and does not deal with the West, and their members are widely distributed in Asia, Africa and Latin America, the external factors they face are much more complicated.
Therefore, when making collective decisions, we must fully consider issues such as the international political situation, balance of relations among countries, and regional interests, so that the issue will be raised to the political-energy issue.
Difference 3. Compared with OPEC, OPEC+'s prospects are even more unclear.
To evaluate the prospects of a mechanism, in addition to analyzing the internal organizational structure, it also needs to analyze its external environment.
Currently, one of the world's largest governance issues is to deal with climate warming. Major industrial countries are deploying the carbon peak and carbon neutrality agenda. This trend is obviously not good for oil-producing countries.
However, in the face of such a general environment, the development paths chosen by oil-producing countries are different. Some choose to keep pace with the times and actively transform, some keep waiting and looking at each step, while others are unable to do anything and can only follow the old ways.
In this case, the more countries and the wider the territory in the consortium, the greater the differences in paths, which is also the restriction of OPEC+'s efforts.
Therefore, to sum up, OPEC+ is an international industrial consortium that is far more complex than OPEC. Since the internal mechanism has not been truly straightened out and the external environment is different, the development trend can only depend on how the parties concerned coordinate internally and externally.
This determines that the decisions it makes now are more temporary and resilient tactical decisions, rather than global and long-term strategic decisions.
This is a review of our first problem today, and it is also our interpretation that this production reduction action is a basic understanding.
So, let’s continue to sort out the second question today:
OPEC+ Why should we reduce production this time?
Is this production cut really a blow to the United States?
is not actually the case. It is too overestimated that the impact of the United States is
This production cut is actually just the development of the established plan. As for the impact of the United States, it can only be said to be collateral damage.
Yes, things are not as conflicting and dramatic as common interpretations. It is just a follow-up to the ultra-long-term production cut agreement reached by OPEC+ the previous year, and is more of an economic consideration.
First talk about how this ultra-long-term production cut agreement came about:
In April 2020, the global epidemic began to break out, and the economic outlook of major oil consumer countries was quickly looked down on, so oil prices plummeted -
fell from nearly $60 per barrel at the beginning of the year to early 20 in April in just over two months.
In this case, in order to reduce the impact of the decline in oil prices on oil revenue, OPEC+ announced the conclusion of the following agreement after multiple internal rounds of negotiations:
has carried out a two-month first round of production cuts starting from May 1, 2020, with a production cut of 9.7 million barrels per day (1 ton is about 7.33 barrels);
has reduced production by 8 million barrels per day from July 2020 to December;
has reduced production by 6 million barrels per day from January 2021 to April 2022.
from 9.7 million barrels to 8 million barrels and then to 6 million barrels. Is this number superimposed one by one?
is actually not, but decreasing.
It means that all three stages are based on the production capacity of OPEC+ agreed upon by the agreement, and then —
The first stage significantly reduced the production by 9.7 million barrels per day;
The second stage reduced the production scale of , and only reduced the production by 8 million barrels per day;
The third stage reduced the production scale of , and only reduced the production by 6 million barrels per day.
Because according to the forecast at that time, the world economy should basically recover by April 2022.
So, is this production cut large?
is very large, because the global oil production in 2019 was about 94.92 million barrels per day, and 9.7 million barrels is equivalent to a direct explosion of 10%.
So as soon as the message came out, the price immediately flew up again.
This year, although the world's demand has generally recovered, since the production cut agreement has expired, production capacity has also recovered rapidly from the April period this year (the blue line in the figure below climbed rapidly from the second quarter of 2022), and as of the end of September, it has exceeded demand a lot (the blue line in the red box in the figure below is higher than the brown line part).
Therefore, OPEC+ decided to cut production by 2 million barrels this time, and it is expected to drop from an average of 29.6 million barrels per day in September to an average of 28.6 million barrels per day. Why is
28.6 million barrels/day instead of 27.6 million barrels/day?
Because OPEC+ still has a problem, that is, due to insufficient investment, the production capacity has never reached the theoretical value. Once the production capacity does not reach the theoretical value, the actual reduction will naturally not be achieved, so it is expected to actually reduce by 1 million barrels.
market supply and demand, this is the most important consideration for OPEC+'s production cut this time, rather than planning a big chess or ruthless move.
Objectively speaking, the decision to reduce output under the condition of oversupply is understandable, and the output reduction itself accounts for only 1% of the global daily output, which is quite moderate.
However, with the intervention of the United States, things began to become complicated:
—It is obviously oversupply, and the United States also requires increased production;
—It is obviously a moderate reduction in production, but the United States is still extremely dissatisfied and criticized.
If OPEC+ cuts production because of the market environment, then why is the US government asking for increased production?
is definitely not because of global demand, because there is already an oversupply. It is obvious that it is to curb domestic inflation in the midterm elections, exchange votes, and also to amplify joint price limit actions to further crack down on the Russian economy to reduce pressure in Ukraine.In comparison with
, isn't it clear who actually politicized the energy problem?
But the US government not only wants to make a fuss, but also in turn accused Saudi Arabia of politicizing the problem. What is this not a turning point?
What is self-righteousness, hegemony , the United States is accusing OPEC.
Therefore, the Saudi government will come out to clarify and firmly reject this stigma. At the same time, it once again emphasizes the strategic nature of Saudi-US relations, which means that I have taken care of you and restrained enough. You can't splash me with dirty water like this anymore.
responds quite rationally and concisely.
So, when we sort out this process, we can know that the fundamental cause of the matter is not the Saudi-US conflict, but the United States deliberately politicized economic issues in order to divert its responsibility for internal and diplomatic failures.
If our media also interprets the American idea and even adds fuel to the fire to render the plot of the Shama-US showdown, it is precisely helping the US government find excuses, which is not advisable.
or above is the answer to our second question today.
The third question is, why is it difficult for the United States to effectively counter? After the decision to reduce production was made, the US government can be said to be furious:
first its Secretary of State Blinken directly criticized OPEC for being "short-sighted and disappointing" and threatened that the Biden administration is reviewing "some response options" about US-Saudi relations.
Then White House spokesperson issued a statement accusing the decision of being a "huge mistake" and that "OPEC+ is clearly in line with Russia."
Finally, Biden came out and spoke out, saying that Saudi Arabia was "helping Russia do things" and that he was considering taking action to "make Saudi Arabia pay the price."
We often say that the essence of anger is dissatisfaction with one's own incompetence. The fundamental reason why the US government is so angry is that it does not have many economic options.
is the largest oil-producing country, but is unable to contain it in the face of such "blatant provocation"?
is true.
Originally, the most effective way to deal with production reduction is to increase production. If the United States can reduce OPEC+ and make up for as much as it can, it won’t take long for OPEC+ to fall into division.
But the problem is that the current space for increasing production in the United States is extremely limited.
This is mainly caused by two reasons:
The first reason is that the US shale oil and gas companies were injured in the 2016 century war and have not recovered yet.
, especially after the establishment of the OPEC+ system, the US shale oil and gas industry has completely stopped.
From 2015 to 2021, there were 274 oil and gas producers, 330 oil field services and midstream companies across the United States going bankrupt or filed for bankruptcy, with a total of more than 600 bankruptcies involving more than US$321 billion in debt, and extremely heavy losses.
The establishment of OPEC+ broke through the last psychological defense of American oil companies
How big is this violent injury left on Americans?
Let me put it this way. To this day, even though the oil price has stabilized at over $70, and even exceeded $110 this year, the US financial industry is not very brave enough to raise funds for surviving shale oil and gas companies, and the latter is also starting construction in fear, for fear of taking a big step again.
didn't expect that this kind of scrutiny caused them to suffer losses again:
originally had oil prices rise this year, and these companies that survived the disaster made a profit, but these companies were afraid of losing money before. The more they thought about it, the more they felt that the good days of this year were unreal. Then, they backhandedly hedged themselves to low oil prices:
data shows that US shale oil producers currently hedge 46% - that is, nearly half - of which 42% were at an average base price of $55 per barrel.
That is to say, these oil and gas are sold at a price of $55, and when the delivery period is delivered, if the market oil price is less than $55, they will make more profits. If the market oil price is higher than $55, the oil companies will lose room for profit.
From the perspective of the average market price in the second quarter, these oil companies lost an average of US$21 per barrel. If oil prices continue to rise this year, they will lose more.
, a mentality that would rather make less than lose more, is quite rare in the bloodthirsty business tradition in the United States, which shows how afraid they are of OPEC+.
So, now, unless the Biden administration can spread a lot of money and let these oil companies rush forward boldly, no one is willing to increase production urgently and grab food at the edge of OPEC+.
a few days ago Reuters also noticed this phenomenon and went to interview these oil companies. Several of the answers were intriguing:
CEO of Patterson-UTI, Texas, said: "For the reduction of OPEC+ production, I haven't heard of any production The dealer said, 'I want to seize the opportunity to fill this vacancy'. Now, in addition to the tension of labor and service , renting the top-notch drill rig will take at least six months of delivery time, so nothing can quickly improve ".
CEO of Anschutz Exploration, Colorado, said: "I don't expect any up and down changes in our position. Our lacks good drilling platform and workers , and the 2023 budget is close to completion, so it will not respond to OPEC+'s production cuts." "U.S. manufacturers will have a hard time increasing production before they get more funds, and OPEC will continue to control pricing," said the CEO of another Texas .
The title of Reuters' report is "Even if OPEC+ cuts production, US shale oil producers will stay on the sidelines."
people, money and materials are lacking. This is the current situation of shale oil companies that once served as the new force in the United States' energy industry.
This is the first reason for the limited capacity for increasing production in the United States.
The second reason is the Biden administration's energy policy.
will have to be thousands of words when it comes to expanding. Let’s focus on the petrochemical part, and other things such as clean energy and infrastructure part will be discussed in detail in the future if you have the opportunity. After the old man came to power, a major change in the US energy policy was to significantly elevate climate change to the national security strategy level and put forward the idea of using the Green New Deal as a framework for responding to climate challenges.
The core of its policy is to "build modern and sustainable infrastructure and equitable clean energy for the future." The concept of
is not particularly friendly to petroleum and petrochemical at first glance.
From the current perspective, the old man played the main restrictive card for petroleum and petrochemicals:
In January 2021, after taking office, the old man immediately signed a series of administrative orders, which clearly required the government's financial support for fossil fuels to be cancelled by 2022, and this part of the funds were used to reward the production of clean energy;
In the mining of fossil energy, he canceled the construction of the fourth phase of the " Gongxinshi " crude oil pipeline project, and strictly reviewed the existing federal oil and gas licenses and leasing, and suspended the approval of new public land or offshore water oil and gas leasing licenses.
. Regarding the Alaska oil extraction that Trump has always wanted to promote, the old man blocked the Arctic waters protection order, announcing that oil exploration and production will be prohibited in the Arctic National Wildlife Reserve and the offshore Arctic, and it is strictly forbidden to destroy the ecological environment of ecologically fragile areas.
, on the one hand, it supports clean energy, and on the other hand, it inhibits petrochemical energy. How do you make oil companies have the enthusiasm for production?
Therefore, the current production capacity of the United States is not that bad at OPEC+, but it is still a big step away from its pre-epidemic level.
You said, how should it fill the pit of 2 million barrels per day?
The above two reasons determine that it is difficult for the United States to effectively respond to OPEC+'s production cuts in economic means.
This is the answer to our third question today.
Does that mean that the United States has no way to take OPEC+?
of course not, it also has a special magic weapon: external tricks.
front-facing can't be done, it can get something else from under the table.
From the current perspective, it is possible to take action in Middle East directly put pressure on Saudi Arabia through issues such as Israel, Iran, Yemen , Qatar, and human rights. At the same time, it strives to differentiate small groups within OPEC+, such as attracting small countries to withdraw from unified actions through expansion of investment and other means, and putting pressure on major countries.
Therefore, when judging the future direction, we are likely to see a more unscrupulous United States performing on the world stage.
In terms of OPEC+, due to the three internal problems we pointed out (loose organization, complex politics, and different national paths), how to deal with the extreme suppression of the United States in the future is also a huge test.
Of course, we will definitely not sit idly by and watch the United States do whatever it takes.
After all, the Eurasian continent is our home court and our home. How can outsiders destroy it, right?
Finally, let’s say an interesting assumption:
If, with our help and coordination, OPEC+ will eventually develop in the direction of [Energy Central Bank], and influence the global energy industry through policies and expectations, and thus promote the global economy to develop in a more integrated, fair and stable direction, what do you think? If
is formed, then the US dollar is probably a very low-level choice for the settlement currency of the central bank .
Let's wait and see!
or above is a review of OPEC+'s production cuts.
. If we talk about chips in the next article, you can leave a message if you have any questions you want to know.
