Oil deal: how OPEC disobeyed trump

Нефтяная сделка: как ОПЕК ослушалась Трампа

A three-day oil rally in Vienna ended on Friday with new agreements on production cuts. And while finding a compromise to the oil producers was difficult, the final decision acceptable to all. The Ministers of the 23 countries of the agreement of OPEC agree to reduce production by 1.2 million barrels per day.

Also OPEC countries agree to continue monitoring the situation on the world market and to respond quickly if necessary.

The Minister of oil of Iraq tamer al-Habdan noted that OPEC deals to cut production by 800 thousand barrels per day, the other participants in the transaction – by 400 thousand barrels per day compared to the October level. Russia under the agreement will reduce oil production to 230 thousand barrels per day. He also noted that Iran, Venezuela and Libya will not be able to limit the catch.

“Iran, Venezuela, because of sanctions and Libya, in connection with the situation in the country – only to these three countries make an exception,” – said the Minister.

The US imposed sanctions on Iran in early November. They include an embargo on oil exports from the Islamic Republic. A temporary exception is made for eight countries, including China.

Against Venezuela also operates the sanctions regime. This country is experiencing a severe economic crisis, oil production there falls rapidly. According to OPEC, production in the country in 2014 dropped from 2.8 million bpd to 2 million in 2017. By the end of this year, according to forecasts by the International energy Agency, the production level could fall to 1 million barrels per day. As for Libya, after the overthrow of Muammar Gaddafi, the country is actually in a state of civil war, and the oil industry in deep crisis.

Meanwhile, Russia has established a “new post-Soviet record oil production in October, increasing production by 50 thousand barrels of oil per day compared to the previous month, to average 11.6 million barrels of oil a day, according to a preliminary assessment,” he said in the November report.

Recall that the first agreement in the format of OPEC+ was concluded in November 2016 and the implied decline in production of 1.8 million barrels. This summer, after the price of oil went over $70 per barrel, the parties to the transaction decided to return to the market of 1 million barrels.

The new agreement will help stop the drop in prices (from a peak of $86, they fell to $58) and to restore the balance of supply and demand. On the positive news from Vienna oil prices on Friday rose by more than 6.2%, Brent futures traded at $of 63.23 per barrel.

However, not all believe that the upward trend of oil took long, because fundamental changes in the balance of forces in the oil market has not happened.

It is possible that soon the market participants realize that not all of the countries have agreed to reduce production, in fact, honour the agreement: for example, in the OPEC agreement, according to estimates of the organization, is performed by only 78%. The deceleration of economic growth in the Asia-Pacific region, which all expect (particularly slowing growth in China, which is the main consumer of oil), can lead to the fact that 1.2 million barrels, which should leave the supply volume will have the same decrease in demand.

Most countries are satisfied with the level of quotations in the region of $60 per barrel. In particular, this price was said earlier, Russian President Vladimir Putin. But to make the prices even lower wants Donald trump. The US President, on the eve of the summit in Vienna, called on the cartel to reduce production.

How will he do with the naughty Saudi Arabia and crown Prince Mohammad bin Salman al Saud, we can only guess. Prince in the US, many believe responsible for the murder of an opposition Saudi journalist Jamal Galucci, but the White house and President of the trump preferred to avoid direct accusations.

Recently a group of senators, after heard the report of the CIA to the crime, said he did not doubt the involvement of the Prince. “No chance – not one – that it happened without the crown Prince,” – said Republican Lindsey Graham.

“I have no doubt about the fact that the crown Prince gave the order to commit murder,” said another Republican Senator Robert Corker.

After signing a new deal OPEC+, the U.S. could impose against the Prince personal sanctions. However, this step is more likely to have a destabilizing effect on the oil market, and will warm up quotes.