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Azerbaijan joined the process of regulating the oil market until 2022

10-04-2020, 10:00

Following discussions lasting about 11 hours, the new “Declaration of Cooperation” was adopted at the 9th Ministerial Meeting of OPEC and non-OPEC countries in a video conference format, on the condition that Mexico will agree to the proposed volumes. 

It should be noted that the new “Declaration of Cooperation” envisages a three-stage reduction of daily oil production from the level of October 2018. However, in accordance with the “Declaration of Cooperation”, Mexico did not agree with the quotas set at these stages in the volume of 400-320-240 thousand barrels, respectively. Other "OPEC plus" countries, except Mexico, have reached an agreement to reduce daily oil production at various times and volumes.

If the "Declaration of cooperation" comes into force, "OPEC plus" countries will reduce daily production by 23%-10 million barrels from the level of October 2018 in May-June.  Production commitment at this stage were set at 6.085 million barrels per day for OPEC member countries and 3.915 million barrels for non-OPEC countries. It should be noted that quotas to limit the production of OPEC and non-OPEC countries include only crude oil volumes. The volume of condensate was not taken into account in the current obligations.

Azerbaijan also took on obligations to create a balance in the global oil market and stabilize oil prices. Within the new Agreement, Azerbaijan, whose daily crude oil production was 718 thousand barrels in October 2018, will have to reduce the production by 164 thousand barrels from this level. During this time, Azerbaijan should maintain the daily crude oil production at 554 thousand barrels.

It was also agreed to reduce the daily oil production by 18%-8 million barrels by "OPEC plus" in July-December 2020 from the level of October 2018. At the same time, quotas for OPEC and non-OPEC countries are set at 4.868 million barrels per day and 3.132 million barrels per day, respectively.  During this period, Azerbaijan will have to maintain daily oil production at the level of 587 thousand barrels, reducing it by 131 thousand barrels.

The “Declaration of Cooperation” reflects that from January 2021 to April 2022, it is planned to reduce daily oil production by 14%-6 million barrels from the level of October 2018.  Production obligations for this period are envisaged for OPEC and non-OPEC countries at 3.651 million barrels and 2.349 million barrels, respectively. At that time, Azerbaijan will have to take an obligation to maintain production at the level of 620 thousand barrels, reducing the volume by 98 thousand barrels.  

Along with "OPEC plus" countries, for the first time, countries such as Norway, Argentina, Colombia, Indonesia, Egypt, Chad, Trinidad and Tobago took part in the video conference. The meeting also called on oil countries outside the "OPEC plus" format to join this process.

Speaking at the meeting, Minister of Energy Parviz Shahbazov said: “It is a fact that we can deal with the existing global problem not separately, but within global cooperation. In a short period of time from March to the present, we once again made sure that sustainable stability in the oil market is impossible beyond the limits of common responsibility, the regulatory process at the global level. The current situation and the uncertainty of the global economy, as well as of the restoration of global oil demand, necessitate further support for the oil market. It is very important to involve countries that are not members of "OPEC plus" in this process.”

The minister also added that each oil country should demonstrate solidarity in order to stabilize the oil market. Azerbaijan, which plays an active role in the regulatory process within the "OPEC plus" format, has supported the global oil market by taking on new obligations.