RusEnergy

MOSCOW. (Oleg Mityayev for RIA Novosti) - At its conference on December 14, OPEC announced its decision to reduce oil production by 500,000 barrels a day starting on February 1, 2007. The explanation was simple: winter in the northern hemisphere will be drawing to a close by that time, so demand for fuel will be falling. Still, it is difficult to say how much crude OPEC will really produce. At its previous meeting, in October, the cartel decided to cut production by 1.2 million barrels a day, from 27.5 million to 26.3 million. However, in reality its oil production in November stood at 27.1 million barrels a day, according to the International Energy Agency. Experience has already taught us that the actual volume of oil produced is not the most important factor. Of greater importance is OPEC's rhetoric, as the organization controls 40% of the world's oil output. Simply by announcing its intention to cut production, OPEC prevents oil prices from falling below a level that is convenient for the majority of oil sheiks. In October, it thus succeeded in ending the decline in oil prices, which had dropped by 25% since July but stopped at $60 per barrel. The latest statement pursues the same goal. At the same time, OPEC is trying not to hurt consumers too much. As the practice shows, the price of $60 per barrel is quite acceptable to them. Overall, everyone is content now. The developed countries, which are mostly energy importers, have accumulated sufficient commercial reserves of oil and petrochemicals to feel safe for the time being. Saudi Arabian Petroleum and Mineral Resources Minister Ali al-Naimi said, "The oil market now has a much better outlook than it did during OPEC's last meeting." The cartel's decision will help to achieve a better balance on the market, he added. Besides, the announcement has not affected the global market much: oil prices moved up, but only to slightly above $62 per barrel. The IEA, which represents consumer countries, is asking OPEC not to cut production further. Ahead of the meeting, it confirmed its forecast for oil consumption growth in 2007: it will be up 1.7% to 85.9 million barrels a day. This is not all that much. The reasons for the decline in growth are the slowdown in the world's biggest economy - the U.S. - and the decreasing growth of oil consumption in China. The World Bank offered its own forecast, released two days before OPEC's latest decision, which is even more, if not overly, optimistic for oil consumers. In its annual report on the global economic outlook, the Bank said that oil demand would grow by no more than 1.2-2 million barrels a day until 2010, while global supply would increase by 3 million barrels a day. Production growth will come mainly from fields in Africa, Saudi Arabia and the Caspian Sea, the World Bank's analysts said. Neither the Bank nor the IEA expects a significant surge in production in Russia, which is the world's second largest oil exporter after Saudi Arabia. Statements by some Russian oil producers about growing output should probably not be taken too seriously. All the more so, as the Russian government admits that domestic oil production is stagnating. The crucial thing for Russia, the bulk of whose revenues come from oil exports, is that oil prices should not fall below $60 per barrel. The Russian budget for 2007 is based on an optimistic forecast for Russian export crude, $61 per barrel. However, its actual price has been no more than $56-$57since autumn, as its quality is believed to be inferior to that of the world's leading brands. Russian experts are unanimous in believing that the price used in the budget is exaggerated. Still, most of them agree that prices in 2007 will not be much different from this year's, and the budget will be fulfilled, only with a smaller surplus than the planned 1.5 trillion rubles. The Stabilization Fund will grow more slowly than planned (it was expected to increase from the current 2 trillion to 4.2 trillion rubles by the end of 2007). Overall, however, everything should turn out well for Russia, thanks to OPEC.