Last week was not the easiest for OPEC.

It all started with the fact that Moscow did not agree with the OPEC proposal to sharply reduce oil production due to the coronavirus epidemic. As a result, the relations with the oil cartel escalated, and the threat of a collapse in prices loomed over the commodity market. Earlier, OPEC lowered the forecast for world oil demand in the first quarter by 440 thousand barrels per day, and in general in 2020, the average daily consumption is expected to decrease by 230 thousand barrels.

The International Energy Agency (IEA) is even more pessimistic. In a February report, experts from this organization predicted a drop in demand in 2020 by 365 thousand barrels per day, to 825 thousand, the lowest since 2011, when the world economy was still recovering from the global crisis.
Taking this into account, Saudi Arabia, a leading oil producer and the actual leader of OPEC, called for rapid reduction in production in order to keep quotes at $ 60 per barrel or higher. On February 5, the OPEC Technical Committee recommended an additional cut in production by 600 thousand barrels per day. The corresponding decision must be approved at the meeting of the ministers of the alliance countries, scheduled for early March, but Riyadh asks the partners in the cartel to meet ahead of schedule and agree on everything as soon as possible. Russia, the largest producer outside the cartel, did not support the new restrictions. According to Russian oil industry workers, the coronavirus epidemic will not upset the balance of supply and demand, the drop in quotations in early February is due to panic reports in the media and will be short-lived.

Iran also intended to increase production, trying to deal with the consequences of US sanctions. Islamic Republic Oil Minister Bijan Zangane announced a $ 1.3 billion contract with Iran’s leading infrastructure and construction company, MAPNA Group, to increase oil production at two oil fields in the province of Khuzestan.
Tehran is taking steps to significantly improve production rates at its key oil fields and intends to increase the average degree of recovery in the fields to 25% over the next 3 years (now this figure is 4.5%). Since Iran’s key sector of oil fields contains 67 billion barrels of oil for every 1% increase in recovery, the recoverable reserves will increase by 670 million barrels. The revenues will be approximately $ 34 billion, even at a price of $ 50 per barrel.

At the end of the week, Brazil presented unpleasant surprise to OPEC. According to the National Agency for Oil, Natural Gas and Biofuel, in January Brazilian production increased by 20.4% compared with the same month last year. Oil production amounted to 3.168 million barrels per day. The cumulative volume of oil and natural gas production in Brazil also set a new record - 4.041 million barrels of oil equivalent per day. Brazil managed to achieve this because of the launch of production on offshore fields of the so-called “subsalt” zone. In January, 2.15 million barrels of oil per day were produced there. And in total oil and gas - 2.68 million barrels of oil equivalent per day, which is 66.37% of all Brazilian production. In general, in the second half of 2019, crude oil production in Brazil increased by 550 thousand barrels per day. This growth was provided by the Lula, Buzios, Sapinhoá, Jubarte, and Sul De Lula deposits of the Santos deep-sea subsalt basin. It is expected that in 2020, production in the pool will increase by another 330 thousand barrels per day. In addition Brazil announced that it does not plan to join the Organization of oil exporting countries or to participate in an agreement to limit production.

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