New strategy ‘will help Opec tackle challenges’

Pressure mounts on energy grouping to extend output cuts beyond June as crude trades low

The Organisation of Petroleum Exporting Countries (Opec) needs a new strategy to tackle challenges in oil markets, experts said at a conference in Abu Dhabi.

Oil prices slipped to almost four month lows yesterday after data showed US crude inventories rising faster than expected.

“It is very important for Opec to shape a new strategy as oil prices trade low and the production from the US increases. They should also iron out differences to play an effective role in the global oil markets,” said Dr Mohammad Al Asoomi, a UAE-based economic affairs expert while speaking in Abu Dhabi on Opec’s current realities and future role in the global oil markets.

Sorting out differences

He did not elaborate on the new strategy but said that Opec members must sort out their differences in balancing oil markets and exert more effort to bring in new countries under its fold.

At present there are 13 countries in the group. The 13 member group came together to chalk out a deal to reduce production by 1.2 million barrels per day starting from January this year despite severe differences among member countries on how much each country should cut output to stabilise oil prices.

Shale concerns

Oil prices went up by more than 10 per cent following the deal but fell in the last two weeks due to the increase in oil production in the US.

“Future challenges for Opec will rely on a number of factors including shale oil, which will be produced not only in the US but also in China, Canada and in Europe. More shale oil means Opec’s role will be deteriorating further,” said Asoomi.

“The rise in oil production from Russia and Kazakhstan will also pose a challenge for Opec in future.”