"OPEC +" video conference, can the production cut be negotiated?

According to foreign media reports, Saudi Arabia will host the "OPEC +" (OPEC members represented by Saudi Arabia and non-OPEC oil-producing countries represented by Russia) video conference on the 9th to discuss how to achieve stability in the international crude oil market.

In early March, Saudi Arabia and Russia failed to reach an agreement to extend the oil production reduction agreement. Saudi Arabia subsequently announced an increase in production and sharply lowered the price of official oil, and international oil prices plummeted. US President Trump publicly "shouts", urging the oil price war to end as soon as possible. Saudi Arabia called on OPEC and non-OPEC oil-producing countries to hold an emergency meeting to discuss a fair agreement to stabilize the oil market.

In the face of the "trio" of the United States, Russia, and Saudi Arabia, will it be possible to reach a reduction agreement at the upcoming meeting? How will the global crude oil market be affected?

"Near an agreement"?

According to Reuters, international oil prices rose on Wednesday, and investors expect the meeting to discuss production cuts to boost oil prices. The market generally expects that this meeting will be "more successful" than the meeting in early March.

The meeting was originally planned to take place on April 6, but it was changed to April 9 due to "need more time for negotiation". A spokesman for the Russian Ministry of Energy recently confirmed that Russia will participate in the meeting.

As for the outcome of the meeting, analysts have mixed views. Analysts pointed out that Moscow and Riyadh are key players in the agreement. "The rift between Saudi Arabia and Russia is the key to reaching an agreement." Said Herman Wang, executive editor of Standard & Poor's Global Platts Middle East and OPEC. , It is simply impossible to reach any agreement. "

Kirill Dmitriyev, CEO of the Russian Sovereign Wealth Fund (RDIF), said that Russia and Saudi Arabia have overcome "many difficulties" and the relationship "is much closer than many people think."

Dmitriyev believes that Russia and Saudi Arabia are "very, very close" to an agreement on oil production cuts. He said, "I think the entire market understands that this agreement is very important and will play a role in stabilizing the market. We are very close." He referred to Russian President Putin ’s remarks last week-Putin proposed last week to reduce daily output by 10 million barrels. "Putin talked about the importance of this agreement, and Russia has shown its will." Dmitriyev said.

Andrei Kostin, CEO of the Russian VTB Bank, holds a similar view. "Russia has a strong interest in stabilizing oil prices and also has political will." "No one wants to see low oil prices, and the United States, Russia, and Saudi Arabia are unwilling." He said, "From this perspective, I think in the end, one A reasonable agreement. "

Saudi Arabia showed certain expectations. The Saudi National Petroleum Corporation (Saudi Aramco) has announced that it will postpone the announcement of the official price of crude oil in May. Specific details will be announced on April 10 to see the outcome of the meeting.

Sun Xia, an associate researcher at the Institute of International Studies of the Shanghai Academy of Social Sciences, believes that there is a greater possibility of reducing production. For Saudi Arabia and Russia, the low oil price has already suppressed the shale oil industry in the United States. It is a wise move to reduce production and raise oil prices in due course. If the price war continues, Saudi Arabia may be under some financial pressure; Russia is also reluctant to lose the opportunity to intervene in the Middle East through oil.

The US Consumer News and Business Channel (CNBC) pointed out that Saudi Arabia wants to make "OPEC +" into "OPEC ++", which means that in addition to the original "OPEC +" members and the United States, Canada, Brazil, Qatar, Countries such as Norway and the United Kingdom with daily oil production of more than 1 million barrels should also participate in the phased output reduction agreement. The analysis believes that the expansion of the coalition for production reduction means that the number of participants in the prisoner's dilemma will increase the difficulty of coordination.

According to Liu Dong, deputy director of the Economic Research Office of the Institute of West Asian and African Studies at the Chinese Academy of Social Sciences, some good news may be announced when the meeting is held, but whether the news is similar to market expectations, "then it is another matter."

Eurasia Group analysts believe that one of the obstacles to reaching an agreement is U.S. policy and the lack of clarity of Trump ’s priorities. One of the key issues is how to coordinate Trump ’s long-term exclusion of OPEC and the stability of the U.S. oil industry. desire.

Zou Zhiqiang, an associate researcher at the Middle East Institute of Shanghai International Studies University, is pessimistic. He believes that it is difficult to reach a production cut agreement in the short term. Zou Zhiqiang said that from the three main actors, Saudi Arabia has provoked an oil price war, and has made it clear that it is unwilling to bear the bulk of the reduction in production. If it does not achieve a relatively satisfactory result, Saudi Arabia may not want to give in; Russia, although the surface is loose However, there are still doubts about whether it can be put into action and fulfill its promises. In addition, Russia has said that the United States needs to participate in production cuts, and there may be multiple considerations. From the perspective of the United States, Trump has not made a clear statement on this. The main action is to convert Saudi Arabia. 1. Russia pulled back to the negotiating table, and the US oil system also decided that it is impossible for the US to adopt non-market behavior to participate in the price alliance mechanism. Zou Zhiqiang said that under the complicated game of all parties, it may not be until June that a preliminary result will be presented.

The United States and Russia have their own considerations

Some media reported that as the world's top three crude oil producers, the United States, Russia and Saudi Arabia will have their own considerations in this negotiation, and it is not easy to reach a new round of production cuts.

Reuters quoted OPEC sources as saying that the meeting will solve two major problems. One is to reduce production on the basis of the existing scale, but it does not return to pre-crisis levels. The second is that Americans must contribute to the reduction of output, and eventually The scale of the production cut depends on the participation of all oil-producing countries.

At the same time, Trump is also putting pressure on the "OPEC +" production cut and actively intervening in the price war. Trump recently threatened that if Russia does not reduce production, it will not rule out tariffs on imported crude oil to protect US oil companies. But he did not make clear that the United States will participate in the production cut.

Sun Xia said that in the global oil market, the United States is now the "number one player." Over the past three years, the global market share of Saudi Arabia and Russia has been declining. The United States has completed the status transformation from an oil-consuming country to an exporting country with shale oil, and surpassed Russia in 2019 to become the world ’s largest oil producer. The rise of shale oil not only impacted global oil prices, but also affected geopolitics.

On the other hand, the US alliance relationship in the Middle East is gradually changing. Thanks to shale oil, the United States' dependence on Saudi Arabia, its traditional ally, is declining. At the same time, Saudi Arabia regards Iran, another major oil producer in the Middle East, as the main regional rival, and the sanctions against Iran are in the hands of the United States.

Sun Xia said that the United States has multiple means of controlling oil, and wants to use it to maintain the hegemony of the petrodollar system. It does not rule out the use of political means by the United States, such as sanctions on the Russian "Beixi 2" natural gas pipeline and diplomatic pressure on Saudi Arabia.

According to a person familiar with OPEC, as the leaders of OPEC and non-OPEC member states, the biggest difference between Saudi Arabia and Russia is how to allocate the production cut share. Russia tends to use the average output of the first quarter as a benchmark for production reduction, while Saudi Arabia hopes to use its April output as a benchmark, the difference between the two is about 2 million barrels. Last week, the two countries also resumed disputes over who should be responsible for the plunge in oil prices.

According to reports, although the contradictions between Russia and Saudi Arabia were reduced and the atmosphere was positive on the eve of the meeting, the two sides have not yet drafted a draft agreement, nor have they reached agreement on the scale and details of production cuts.

Our reporter Li Xue Yang Ying