June 22, 2024
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Rosneft CEO Blasts Middle East Spare Oil Production Capacity

Igor Sechin, CEO of Russian energy giant Rosneft, stated on Saturday that the increase in spare oil production capacity has neutralized efforts by OPEC+ to reduce oil output.

Speaking at the St. Petersburg International Economic Forum, Sechin pointed out that the combined spare oil production capacity of Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq amounts to 5.6 million barrels per day, which is 13% of OPEC+’s current output.

Sechin, known for his skepticism about Russia’s cooperation with OPEC, suggested that the creation of these reserves by both Western and Middle Eastern companies might be in anticipation of significant market changes.

“The presence of such ‘phantom barrels’, which can have a large-scale impact on the market, offsets the impact of the voluntary reduction in production quotas undertaken by the main OPEC participants,” he said.

This phenomenon, he noted, is reflected in the market prices, which dropped following the recent decision by OPEC+ ministers.

Last Sunday, some OPEC+ members, including Russia, agreed to phase out voluntary cuts of 2.2 million barrels per day over the next year, starting in October.

The group also decided to maintain other cuts amounting to 3.66 million barrels per day until the end of 2025.

Despite these measures, oil prices declined this week, with Brent crude hitting a four-month low below $77 per barrel on Tuesday, although prices rebounded to over $79 by the end of the week.

Sechin also touched on the historically contentious issue of production capacity figures within OPEC+.

These estimates are crucial as they help establish baseline production figures from which cuts are calculated. Member countries often push for higher capacity estimates to secure higher production quotas after cuts are applied, leading to increased revenues.

He also mentioned that uncertainties, such as the outcome of the upcoming U.S. presidential election, add to the complexities of the oil market.

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