By Kamel Al-Harami
Despite the enormous political pressure on the oil organization, it still managed to reduce its production and reach an agreement with Russia to cut production by 1.2 million barrels last Friday in Vienna.
It had to please Iran to accept and agree on some cuts in production or allow Iran to remain outside the agreement for the time being. It was a success for OPEC at a time the US administration is putting pressure on Saudi Arabia not to reduce production and to keep oil prices as low as it pleases its president.
The other success was in reducing production by more than one million barrels which surprised the markets, but showed the commitment of oil producing countries to make some positive cuts; thereby, forcing oil prices to soar to more than $63 a barrel – still below the level aimed by producers which is $78 per barrel. This is the comfortable zone that can satisfy all OPEC members and Russia. Certainly, the last 10 days was not hectic for the oil markets considering the announcement of Qatar to exit from OPEC, focus on its gas and expand in order to meet future needs.
This leaves OPEC with some problems such as keeping its founding member and allowing some new applicants to join the organization. Perhaps, OPEC will face new challenges in the future.
With the US shale gas growing at a fast rate, America will be the biggest oil producer by the middle of next year reaching 12 million.
It will add a new force to the oil markets, followed by Russia with over 11.6 million and Saudi Arabia in the third position. These new powers will add to the headaches of OPEC in terms of managing supply and maintaining oil prices within the comfortable and acceptable level.
Now, OPEC cannot manage its oil supply without help and support from Russia and this will continue. However, Russian companies are not happy with the oil cuts on their part; while neither OPEC nor Russia can improve oil prices without each other’s firm support.
The coming months will witness different scenarios, maybe some surprises and withdrawals. Still, the OPEC meeting last Friday was another success with the support of Russia.
Al-Harami
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