OPEC's "unexpected" decision
By Aygun Badalova
The decision made today by the member countries of the
Organization of the Petroleum Exporting Countries (OPEC) to keep
the oil production quota unchanged was widely anticipated.
At the OPEC's 166-th meeting in Vienna on November 27, it was
announced that the organization's member countries have made a
decision to keep oil production quota unchanged at the level of 30
million barrels per day.
At the meeting, the Secretary of OPEC Abdalla Salem El-Badri said
that currently the market prices are low, however OPEC plans to
wait and see how the market behaves, and reacts to such
volumes.
"We see that the decline in oil prices do not reflect the market
fundamentals," he said at the meeting.
The announced decision was basically foreseen, judging by the
recent statements of the OPEC cartel’s member countries.
Meanwhile, the last hope for the oil production cut was nullified
by a statement made earlier by Bijan Namdar Zangeneh, the oil
minister of Iran, which is an OPEC member country.
Zangeneh said in his statement that Iran is not going to cut
production, although, recently his country has been an ardent
supporter of stabilizing prices by means of adjusting the level of
supplies.
Morning Nov. 27 amid the weakening of the chances for OPEC to take
a decision to cut the oil production, the oil prices plummeted once
again. The WTI oil price fell by $1.48 to $72.19 per barrel, while
Brent oil price went down by $2.27 to $75.48 per barrel.
As soon as the decision of OPEC was announced, Brent price has
fallen to $74,62 per barrel, and WTI fell to $71,23 per barrel.
OPEC’s decision shows that the current oil prices still stand at a
level that is acceptable for the cartel countries, and don’t pose a
threat to their economies. However, this is also arguable. For such
OPEC countries as Iran, the further decrease in oil prices can have
quite serious consequences.
In case of Iran, such a sharp change of position can be explained
by a failure in negotiations on the Islamic Republic's nuclear
program. As for the other members of the cartel, it is most likely
that they decided to take a wait-and-see policy and observe how the
prices will behave next. After all, according to the majority of
countries, the current decline is not due to an excess of supply on
the market.
OPEC Secretary General Abdalla Salem El-Badri previously said that
the supply is growing in parallel with the demand, but the scope of
increase of supply does not actually correspond to the 25 percent
change of the price that occurred on the market.
The result of OPEC’s decision will probably be further fall in oil
prices. Oil prices may even decline to $65 per barrel if cartel’s
member countries don’t take any action, according to the US JP
Morgan bank.
At the same time analysts believe that the further fall in oil
prices will become a strong catalyst for OPEC members to resolve
their differences in opinion, albeit perhaps not until the New
Year.