Oil: why OPEC plays the status quo – Challenges.fr

This was expected. As at the meeting OPEC and non OPEC on April 18 in Doha, the Organization of Petroleum Exporting Countries ( OPEC ) maintained in the state on Thursday 2 June at Vienna’s current production level, failing again mention any numerical ceiling. All but a surprise since Khaled al-Faleh, the new Minister of Energy of Saudi Arabia, country leader of the cartel, had assured before the meeting that “everyone (was) very satisfied with the state of the oil market” which was “coming back into balance.” A decision has also not disrupted markets, a barrel of Brent took 25 cents – to 49.97 dollars -. Over the closing vigil and WTI up 15 cents to 49.16 dollars

the cartel members justified this decision by the continuous rise in oil prices, near $ 50, far from the $ 27 reached in mid-January. “The Conference observed that since (…) December 2015, the price of crude oil rose more than 80%, the supply and demand converge,” which proves that “the market is engaged in a process rebalancing “, argued the OPEC. “We will continue to consult us (…), the market is moving in the right direction”, supported Khaled al-Faleh that replaced experienced Ali al-Naimi, 81, strongman of the cartel over the last twenty years. This price increase since the beginning of the year is explained by a fall in production due to several factors: fires around Fort McMurray in western Canada, the unrest in the Niger delta region in Nigeria, or other small disturbances such as lower oil exports Iraqi Kurdistan or transiting through the three-day strike that affected the oil industry in Kuwait. The recent increase in demand in China replenishes its stocks also explains that “rebalancing”.

A status quo that suits Riyadh and Tehran

among the other issues of the meeting: the state of relations between Saudi Arabia and Iran. The divisions between the two countries had punctuated the Doha meeting. L are Saudis, led by the new strong man of the kingdom, the young Crown Prince Mohammed bin Salman, posing as a prerequisite that the limitation of production, should it take place, would apply to all members of OPEC. “Ridiculous” reacted Tehran had decided to boycott the Qatari large marquee and gave preference to a system of quotas by country against an overall ceiling for the members of the cartel proposed by Saudi Arabia. Since the lifting of sanctions in January , Iran increases its production (3.3 million barrels per day in March) and intends to regain its position on the oil market. A conflict that had so undermined the historic agreement hoped for Riyadh which could combine for the first time in fifteen years OPEC to other major oil producing countries, such as Russia, the second largest producer in the world.

And the status quo renewed in Vienna confirmed that the rise in price even less incentive OPEC to reach agreement on a freeze in production. And this is the game of the two countries that are profitable from a barrel from 20 dollars to Riyadh from 50 to 60 for Tehran. Maintaining the current generation also allows Iran to continue to catch up and to Saudi Arabia to maintain its market share. But all other OPEC countries can not necessarily be welcomed status quo. For countries like e Venezuela ( to the brink of bankruptcy, the country increased the price petrol 6.000%) , Algeria or Nigeria which about 90% of exports are hydrocarbons, oil is profitable from 80 or even $ 120 a barrel. Despite the rise in prices, so they continue to lose money. “There is a real risk of split OPEC if prices do not rise quickly beyond 50-60 dollars, reported about it to Challenges in April, Thomas Porcher , oil economist and Professor at the Paris school of business , author of the book “ 20 ideas about energy.”