With three weeks to go before the March 15th OPEC meeting, speculation is rife about what the cartel will do regarding additional production cuts. The traditional price hawks Venezuela and Iran continue to call for another cut, while the OPEC governors, as distinct from the decision-making Oil Ministers, are reported to be opposed to another cut at this time. The governors, however, agree that the market is still oversupplied by about 1.6 million b/d and that a cut of this size may be necessary in the second quarter.
A new factor in the situation is the role of Russia in further production cuts. Moscow, which is being hurt as badly by low crude prices as many OPEC countries, showed up at the December OPEC meeting talking about some sort of association other than full membership in the cartel. Following the December meeting several OPEC members expressed frustration that Russia made no move to cut production while receiving the benefits of OPEC’s efforts.
Last week Russia’s Vice Premier said that he has been invited to the March 15th meeting to discuss a memorandum of understanding with the cartel that will be aimed at some sort of coordination.
Last week Azerbaijan said it will be producing less oil in 2009. At the December meeting, Azerbaijan was the only non-OPEC country that offered to make a production cut. It is not clear whether production cuts this year will be deliberate or stem from ongoing production problems.