The OPEC General Secretary revealed almost secret information to the world community, having said that there is too much oil in storage around the globe. With the total crude oil stockpile exceeding 3 billion barrels, lack of free reservoirs is becoming a serious problem. Some experts believe that this is the real reason why the preliminary deal on output freeze was reached. Producers did not slow down the output pace after the oil price had plummeted to $20 per barrel. Now, when the oil is twice more expensive, it is even more unreasonable for them to cut output for the price stabilization. If they wanted to support oil prices but not to hold its market share, they would sign the deal on output freeze in April. Now storage facilities are too full to place any more oil, so output cut is just a necessity rather than OPEC’s goodwill gesture.
Let us remind that the petroleum exporting countries agreed to cut production to 32.5-33 million barrels per day from the current levels of 33.5 mbpd. The details of this deal, including quotes for all OPEC members, will be announced at the November meeting. Though Russia is not an OPEC member, it is one of the world’s biggest producers and keeps pumping at a record-high pace. The country said that it would find the way to freeze output if an agreement with OPEC was reached.
