Saudi Arabia seems determined to hold a line and further defer an OPEC production cut to prop up prices, David Koranyi, director of the Atlantic Council’s Eurasian Energy Futures Initiative and deputy director of the Atlantic Council’s Dinu Patriciu Eurasia Center told Trend.
“Riyadh is haunted by bad experiences of production cuts in the past when it lost market share to competitors within and outside OPEC,” Koranyi said.
The Saudi leadership is presumably preoccupied with losing market share to a post-sanctions Iran as well, and is determined to outcompete US shale producers, according to Koranyi.
Saudi Arabia ranks first among OPEC member countries in terms of crude production. The country was the one who pushed OPEC’s strategy shift to defend market share rather than cut output to support prices.
According to OPEC latest Oil Market Report, Saudi Arabia produced 10.088 million barrels of oil per day in Dec. 2015. In 2015 the country’s oil production amounted to 10.113 million barrels per day compared to 9.683 million barrels per day in 2014.
Total OPEC production in 2015 amounted to 31.846 million barrels per day compared to 30.771 million barrels per day in 2014. The official production quota for OPEC production is set at 30 million barrels per day.
Koranyi believes that the chances for a Saudi-Russian ‘grand bargain’ touted in the media in the last few days are slim: trust is low and interests diverge too much.
At the same time, he believes, geopolitical uncertainties elsewhere, investment needs in the oil sector point towards a potential rebalancing of the market and an increase in oil prices already in the medium-term.
Huge amount of oil glut has pushed the prices down, from $108 in the first half of 2014 to the current $35.
Venezuela’s oil minister Eulogio del Pino has started a round of trips to major oil producers to convince them to decrease production level in order to raise the prices.
Iranian Shana news agency reported that six members of the OPEC have already agreed to hold an urgent meeting. Iran, Oman and Iraq are among these countries.
After a meeting with his Iranian counterpart Bijan Namdar Zanganeh, del Pino said that Russia also support an urgent meeting between OPEC members to cut production level to push the prices up.
Alexander Novak, Russian energy minister, said Jan. 28 that the planned OPEC meeting in February with representatives of other oil-producing countries could discuss reduction of oil production by each producer country by five percent, but a general agreement is needed for that.