BREC Director for Radio Sputnik: 'No signs of OPEC cutting oil production'

08 December 2015

REPORTER:” Some expected the OPEC to cut production's low oil prices hit the economies of the club members. Why didn't this happen?”

TERTEROV: I don't know if I would agree with that, because we were not really expecting them to cut production. I was in Abu Dhabi about a few weeks ago and all the positions pointed towards Saudi Arabia maintaining its production as the lead producer. Iraq has been of increasing its production and is looking to work in a very positive way with the foreign oil companies to lift production further. So, this announcement of today didn't really surprise me in any major way.

REPORTER: And what about the upcoming months, what are we going to see, I mean who's going to benefit from the situation and who is going to suffer most?

TERTEROV: Probably we are going to see more of the same at the moment. There is a bigger context to this whole discussion and this is the market share side of the discussion versus the price. There is a lot of shale oil being produced in the United States and the US is importing a lot less oil than traditionally it has been and this is adding a downward impact on prices. So, we are not seeing any signs from the Saudis or any of the Gulf Cooperation Council members or OPEC members in this respect to adjusting their behaviour. Their behaviour is rather conservative, they want to maintain market share. In the medium term, they see prices moving back up towards to corridor between 60 and 80 dollars per barrel. But, for the moment I can't really see any concrete signs, let's say statements from the Saudi oil minister, movements of investments into an extension of production in Saudi Arabia, or toward changed behaviour. One interesting caveat I would add in terms of your question on winners and losers: Indonesia has come back to OPEC and Indonesia at the moment is benefiting from low oil prices, because it is actually the only member of OPEC which is an importer of oil. OPEC is actually an exporters' club, exporters' cartel, but Indonesia because of its deficit of upstream production and also some investment issues is still an importer of oil. From their perspective, to maintain a policy of increased production, not cutting supply, maintains prices at this rather low level. So, Indonesia in the short term is actually one of the winners from this because it is an oil importer.

REPORTER: Have you got one minute just to give us what you think about the meeting that took place in Vienna?

TERTEROV:” I don't have a detailed assessment of the meeting, but the meeting produced an outcome of what I expected- maintaining production. We are always looking whether OPEC will cut production, or increase production, maintain production... Production levels have been reinforced to maintain themselves at a constant level at this meeting, which is a relatively conservative policy by the Saudis. They are maintaining this because now they are drawing on their own hard currency reserves, which is attracting a quite lot of criticism from the IMF, we saw this at the meeting in Abu Dhabi that I have attended. But the meeting hasn't really produced anything surprising, it has not produced really anything unexpected from my perspective. It's just a continuation of this current trend of conservative continuation of production levels, leading to relatively low oil prices, but with the view to rebounding of oil prices, probably in the region of 12 to 18 months from now, not earlier.”

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