With less than 25 days remaining for the crucial OPEC meeting in Vienna, the outlook towards a complete agreement does not seem promising. Despite the verbal agreement reached last September in Algiers to cut down or maintain production, the opposite has taken place with all the brothers of OPEC.
The good brothers of this oil organization are currently producing close to 34 million barrels instead of 33 million barrels per day as agreed verbally just about 45 days ago. This has evaporated all the price gains made earlier with the barrel cost reaching $53 such that it is now below $46 per barrel.
Almost all OPEC countries are maximizing their production without caring about the oil surplus or the lowering of oil prices. It seems all members are trying to take a position of its maximum achievable limits of production and then present it as its sustainable level to be recorded in Vienna. Therefore, the brothers will continue to push for extra volume this month for producing an extra barrel.
This outlook is not promising and probably indicates that all members are perhaps happy with the current prices and with keeping the international oil companies away from investing in new fields outside OPEC countries. Or maybe it is aimed to force Saudi Arabia and its Gulf allies into absorbing all the cuts or making all the sacrifices for the rest of the group for months to come.
The upcoming meeting is going to be difficult, as the market is in need for more than 1.5 million barrels of OPEC oil. This will be hectic and will take long time for each of its members excluding Iran, Nigeria and Libya.
The outcome is not going to be easy. The coming days could be crucial in terms of reaching a last-minute compromise, unless the oil ministers put all their cards on the table on the same day and same time.
From now, the oil prices will be zigzagging without any direction while the oil ministers will be drafting their last-minute requests to the heads of their states for a final say, with a warning note that the upcoming meeting will be the last chance for any future compromise.
By Kamal Al-Harami
Independent Oil Analyst