MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - On September 9, the 13 OPEC member states met in Vienna to discuss their official quota for oil production.
Several says before the conference, many OPEC members and independent economists said that the cartel is unlikely to approve further cuts in oil production, which currently stands at 24.845 million barrels per day (bpd). It suits both oil consumers and oil producers, including Russia, which is not an OPEC member.
The best is the enemy of the good
"The market is in very good shape: very well-supplied," Saudi Oil Minister Ali al-Naimi said on arriving in Vienna on Tuesday ahead of the OPEC meeting. "The price is good for everybody, consumer and producer, hovering recently between $68-$73 a barrel," he added.
Saudi Arabia is the most influential member of the cartel.
When asked if he thought OPEC needed to cut output at its meeting, Naimi said: "With the price ranging between $68 and $73, what else do you want?"
The price of U.S. crude oil WTI grew $3 to $71 per barrel ahead of the OPEC conference, and stayed there on the day the cartel met in Vienna.
Since late last year when oil prices plunged to $33 per barrel, the OPEC led by Saudi Arabia has approved unprecedented cuts in production, working in stages to ultimately reduce the cartel's production by 4.2 million barrels per day.
Saudi Arabia has made the largest contribution to that policy, cutting production by 2.75 million bpd, Naimi said.
As a result, WTI price at the New York Mercantile Exchange (NYMEX) reached $75 in August 2009.
Saudi King Abdullah spoke out in support of that price, and the world's largest oil producers supported his view, saying that this price is what they need to revive the growth of investment in the oil sector.
However, Saudi Arabia's partners in the cartel do not think they should further reduce oil production because this policy is undermining their export revenues. Therefore, OPEC is unlikely to approve further cuts soon.
Russia increases oil production
While pursuing a policy aimed at helping oil prices grow, Saudi Arabia has ceded leadership in oil production and export to Russia. This is the first time it happened in post-Soviet history.
Currently, Saudi Arabia produces a bit over 8 million bpd, and its export of oil and refined products fell to 7 million bpd in the 2nd quarter of 2009.
Meanwhile, Russia increased oil production to 9.97 million bpd in August 2009 and the export of oil and refined products to 7.4 million bpd in the 2nd quarter.
This change is all the more surprising, as oil production in Russia fell by 0.6%, to 9.78 million bpd, in 2008, for the first time in ten years. Deputy Prime Minister Igor Sechin, responsible for Russia's fuel and energy sector, told OPEC late last year that Russia was prepared to cut production in order to keep up oil prices.
But, while OPEC reduced oil production and export in 2009, Russia has been increasing it.
As global oil prices resumed growth this year, Russian oil companies developing new fields in East Siberia have been granted big tax privileges. This encouraged the largest producers - Rosneft, LUKoil and TNK-BP - to increase production.
The Russian government expects the booming oil export revenues to encourage GDP growth in the next three years, helping the crisis to end in the country in 2012.
However, increased Russian oil exports may undermine OPEC's efforts to maintain high oil prices, thereby encouraging the member countries to increase production.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
