Upcoming OPEC meeting enjoys little hope to be productive
By Fatma Babayeva
The forthcoming meeting of the OPEC member countries in Vienna on June 2 remains a key event for the global oil market, whilst still enjoys little hope to be productive.
The previous meeting of major oil producers held in Qatari capital Doha on April 17 revealed their inability to compromise and negotiate, even for the sake of common interests.
The oil freezing deal is not topical anymore. The deal to put a ceiling on the production volumes of the oil producing countries and to keep oil output in the market at the level of early 2016 was never actually embodied in reality. Top oil producers have not done anything to resolve the oil glut problem in the market which is pressing down oil prices since mid - 2014.
Saudi Arabia has kept requiring commitment from the Iranian side to the freezing plan in order to cap its output. On the other hand, Iran has been striving to restore its pre sanctions oil export levels.
What’s more, the current situation in the global oil market, namely increase in oil prices does not necessitate the urgent need for such a deal. Last week, oil prices jumped over $50 per barrel despite the fact that Iran has been steadily ramping up its oil exports to the global oil market.
In its upcoming meeting OPEC will also elect its new Secretary General. Experts believe the member countries of the cartel are not going to solve the problems of the global oil market, but its internal issues.
Oil prices are going in the right direction and will continue growing, albeit slowly. In this case, OPEC does not need to do anything, Charles Ellinas an expert in the field of oil and gas market, CEO of the Cyprus National Hydrocarbon Company (CNHC) told Trend on May 31.
A senior analyst at Bernstein Research Neil Beveridge told The Wall Street Journal on May 30 that OPEC has no reason to cut production at this point when the market is already moving back to equilibrium.
Additionally, senior adviser to the United States Energy Security Council and co-director of the Institute for the Analysis of Global Security (IAGS) Gal Luft also expects no significant change in OPEC's policies in the near future as Saudi Arabia will continue to adhere to its strategy to preserve market share and squeeze out oil producers having high lifting costs, especially the U.S.
Most likely, Saudis will increase oil production in the coming months in order to meet the seasonal needs of the country, according to the analysts of the analysts of the British consulting company Capital Economics.
In accordance with the data provided by OPEC, oil production of Saudi Arabia amounted to 10.125 million barrels per day in April compared to 10.133 million barrels per day in March.
Likelihood about the increase in Saudi Arabia’s production, as well as, expectations that Iran’s oil output will go up make any attempt to revive the freezing deal fail, said analysts of Capital Economics.
Furthermore, Saudi Arabia, Iran, Iraq and UAE increased oil exports to Asia in a fight to grab more market share.
June meeting is a good opportunity to review the current policy of the cartel, and the best solution will be to take no action over the next six months, International Oil Daily wrote citing the OPEC’s delegate.
According to the delegate, now, given to the situation, there is no need for any measures.
Moreover, no specific proposals on the levels of oil production is on the agenda of the OPEC’s meeting, Iraq’s OPEC envoy Falah Alamri told, reported The Wall Street Journal on May 30.
Currently oil quota of OPEC amounts to 30 million barrels per day. OPEC accounts for about 40 percent of oil supplies to the global market. It lost its role as a cartel and cannot regulate global oil prices via adjusting member states’ oil output anymore.
OPEC ceased setting production quotas for individual members in 2011 and abandoned an output ceiling entirely in December 2015.
Oil basket price of OPEC increased to $45.15 per barrel on May 31 from $44.80 on May 30.
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Fatma Babayeva is AzerNews’ staff journalist, follow her on Twitter: @Fatma_Babayeva
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