- What is this important meeting in general?
The importance of this meeting lies in the following three matters :
1- Deepening the production cuts from what was previously agreed upon for the month of July, which would accelerate the rebalancing of the markets
2- The unprecedented focus on the commitment of all member states and the establishment of a monthly monitoring system for the production of member states. This means that the possibility of a monthly renewal of the agreement exists if there is a need for that .
3- Establishing a new system used for the first time in the history of OPEC, which is the future reduction in the production of countries that have not committed to quotas with the same amount of previous abuses. This means that countries that did not abide by their production quotas in May and June should reduce their production during the next three months by additional quantities to compensate for the increase they have made in these two months. This system has been historically defined in some international commodity organizations such as the tin and coffee organizations .
- What is the effect of extending the agreement to reduce production by 9.7 million barrels per day for another month?
Its effect is that it will reduce the surplus in global oil stocks by about 40 to 60 million barrels, compared to the non-extension and commitment only to the April agreement, which contributes to moving towards achieving balance in the oil markets after it suffered the largest tremor in its history .
The historic OPEC agreement signed last April approved reducing production by 9.7 million barrels per day in May and June, and by 7.7 million barrels per day from July until the end of the year. The difference between what will be officially agreed today and the previous agreement is to deepen the reduction in July to be 9.7 million barrels per day instead of 7.7 million barrels per day. The difference is two million barrels per day over 31 days .
- Why was the submission date of the meeting?
Usually national companies in OPEC countries announce the prices and quantities available to their customers a period of time, usually about a month, so that everyone can plan for the production, transportation and receipt operations. Saudi Aramco usually announces prices on the fifth of every month. The company has announced that it will delay announcing July prices, as it did last April on May prices, until OPEC + meetings end. That is why the meeting was held today instead of next weekend .
- What is required for the markets to achieve balance by the end of this year?
If OPEC + nations renew their agreement today every month until the end of October, then the balance in the markets will be achieved by the end of this year. The problem is that the rapid and large price hikes are not in favor of the countries currently producing for four reasons. The first is that oil producers in both the United States and Canada reopen the wells they closed due to low oil prices, the second is oil companies adjusting their oil investments upwards, and the third is the possibility that oil demand growth will be affected. Negatively, prices rise in this way. Fourth, high prices will reduce the commitment of some OPEC + member states. That is why it is best for OPEC + to focus on gradually balancing the oil markets so that prices rise somewhat slowly .
The bottom line
The agreement that will take place today will make OPEC + more flexible in dealing with market events on the one hand, and stronger due to the heavy focus on commitment to production quotas. This flexibility will be on both sides: reducing or increasing production, depending on the market situation. The issue of the growth of global oil demand is still obscure, so the new system allows dealing with any surprises quickly. The importance of this development to the OPEC + system is that it can easily cope with the return of Libyan oil and others to the market in the coming periods. Therefore, what will be agreed upon today is a pre-emptive blow to these developments as well .
* An international oil expert
Quoted from the site "energy "
economy-news.net/content.php?id=20609
The importance of this meeting lies in the following three matters :
1- Deepening the production cuts from what was previously agreed upon for the month of July, which would accelerate the rebalancing of the markets
2- The unprecedented focus on the commitment of all member states and the establishment of a monthly monitoring system for the production of member states. This means that the possibility of a monthly renewal of the agreement exists if there is a need for that .
3- Establishing a new system used for the first time in the history of OPEC, which is the future reduction in the production of countries that have not committed to quotas with the same amount of previous abuses. This means that countries that did not abide by their production quotas in May and June should reduce their production during the next three months by additional quantities to compensate for the increase they have made in these two months. This system has been historically defined in some international commodity organizations such as the tin and coffee organizations .
- What is the effect of extending the agreement to reduce production by 9.7 million barrels per day for another month?
Its effect is that it will reduce the surplus in global oil stocks by about 40 to 60 million barrels, compared to the non-extension and commitment only to the April agreement, which contributes to moving towards achieving balance in the oil markets after it suffered the largest tremor in its history .
The historic OPEC agreement signed last April approved reducing production by 9.7 million barrels per day in May and June, and by 7.7 million barrels per day from July until the end of the year. The difference between what will be officially agreed today and the previous agreement is to deepen the reduction in July to be 9.7 million barrels per day instead of 7.7 million barrels per day. The difference is two million barrels per day over 31 days .
- Why was the submission date of the meeting?
Usually national companies in OPEC countries announce the prices and quantities available to their customers a period of time, usually about a month, so that everyone can plan for the production, transportation and receipt operations. Saudi Aramco usually announces prices on the fifth of every month. The company has announced that it will delay announcing July prices, as it did last April on May prices, until OPEC + meetings end. That is why the meeting was held today instead of next weekend .
- What is required for the markets to achieve balance by the end of this year?
If OPEC + nations renew their agreement today every month until the end of October, then the balance in the markets will be achieved by the end of this year. The problem is that the rapid and large price hikes are not in favor of the countries currently producing for four reasons. The first is that oil producers in both the United States and Canada reopen the wells they closed due to low oil prices, the second is oil companies adjusting their oil investments upwards, and the third is the possibility that oil demand growth will be affected. Negatively, prices rise in this way. Fourth, high prices will reduce the commitment of some OPEC + member states. That is why it is best for OPEC + to focus on gradually balancing the oil markets so that prices rise somewhat slowly .
The bottom line
The agreement that will take place today will make OPEC + more flexible in dealing with market events on the one hand, and stronger due to the heavy focus on commitment to production quotas. This flexibility will be on both sides: reducing or increasing production, depending on the market situation. The issue of the growth of global oil demand is still obscure, so the new system allows dealing with any surprises quickly. The importance of this development to the OPEC + system is that it can easily cope with the return of Libyan oil and others to the market in the coming periods. Therefore, what will be agreed upon today is a pre-emptive blow to these developments as well .
* An international oil expert
Quoted from the site "energy "
economy-news.net/content.php?id=20609