Support grows for deeper OPEC+ oil output cuts
Azerbaijan is likely to support further oil output cuts by OPEC and its allies, the ex-Soviet country’s energy minister said, should the move be necessary to balance demand fears after a coronavirus outbreak in China.
A technical panel that advises the Organization of the Petroleum Exporting Countries and its allies led by Russia, the group known as OPEC+, proposed this week a provisional cut of around 600,000 barrels per day (bpd).
“Azerbaijan is likely to support this,” Parviz Shahbazov told Reuters in an interview. Azerbaijan is not an OPEC member but is part of the OPEC+ group informally established in 2016.
Although Azerbaijan is not a big contributor to the overall cuts by OPEC+, its position may shed light on Russia’s thinking as non-OPEC members of the group usually take a unanimous decision. Moscow is yet to give its nod to the further cuts.
Producers in the OPEC+ group are scheduled to meet in Vienna on March 5-6, although the meeting could be brought forward depending on how the coronavirus outbreak affects oil prices going forward. Brent dropped below $55 a barrel on Friday.
However, Shahbazov said he believed that the impact of the coronavirus might be short-lived, adding to a small number of other officials and market players who believe that markets are overreacting.
“At this stage, the effect of coronavirus is temporary and I do not see global threats, but I do not rule out that there may be further (oil output) cuts,” he said. “We can meet earlier than March if necessary although there is no such need so far.”
The death toll from the coronavirus outbreak in China rose above 800 on Sunday, surpassing the number killed globally by Severe Acute Respiratory Syndrome across 2002 and 2003.
Shahbazov said that oil output in Azerbaijan was around 770,000 bpd last month, in line with its OPEC+ quota.
The country has a balanced budget based on an oil price of $55 per barrel but can withstand a temporary dip to $40, Shahbazov said.
Baku, which plans to start gas exports to Europe, has also signed deals with Saudi Arabian energy company ACWA Power and United Arab Emirates’ Masdar to expand in renewable energy.
Shahbazov said the firms would invest around $400 million to build wind and solar power plants with a total capacity of 440 megawatts. Construction is due to start in September and last two years.