Russia dismisses an “institutionalized” OPEC+ format to avoid U.S. sanctions

Russia dismisses an “institutionalized” OPEC+ format to avoid U.S. sanctions

It is highly unlikely that the OPEC and other oil producing nations establish a joint organization. This could create additional bureaucracy, in addition to risking possible U.S. sanctions, according to Russian energy minister Alexander Novak.

The Organization of Petroleum Exporting Countries and other producers led by Russia have made unprecedented efforts since 2016 to reduce oil production and support prices.

The OPEC and Russia account for over 40 percent of the world’s crude.

Russia’s energy ministry stated that Moscow and the OPEC, led by Saudi Arabia, had reached a general agreement that the OPEC+ format should be “institutionalized” and extended until 2019. Member countries are aiming to oversee the market and, if necessary, assume new coordinated actions to maintain oil prices.

However, the Russian official said that this idea had been dismissed and that his country wants to prevent possible U.S. sanctions.

“There is a consensus that there will be no such organization. That’s because it requires additional bureaucratic brouhaha in relation to financing, cartel, with the U.S. side,” Novak told a briefing to reporters.

“I think, non-OPEC (countries) will not agree as they don’t want to be hit by sanctions,” he added.

Production cut agreement

On December 7, the OPEC and its allies, led by Russia, announced they had agreed to reduce oil production by 1.2 million barrels during the first semester of 2019.

Member countries will reduce production by 0.8 million barrels with equal quotas for all nations. However, Libya, Venezuela, and Iran will be exempted from this pact. For their part, non-OPEC countries will reduce production by 0.4 million barrels.

Market experts indicate that Iran will not have to join the production cut measures given the weight of U.S. sanctions. In the meantime, Venezuela and Libya are having a hard time maintaining their production levels.

Regarding this agreement, Novak said in a press conference with Saudi counterpart Khalid al-Falih that these cuts could help stabilize the market faster. Nevertheless, he is now concerned about possible U.S. sanctions.

Novak also said he is convinced that this is a very strong indicator for nations that thought that cooperation could not work. The OPEC+ (OPEC and non-OPEC nations) has shown that it can produce results.

For his part, Al Falih stated that his country, the largest producer in the organization, will always be committed to the stability in the international oil market.

He said that Saudi production will stand at 10.2 million barrels as of January, down by 500,000 barrels from December.

The next OPEC meeting will be held in Vienna on April 8, 2019.

For more information, visit Energía16

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