The oil organization has no choice but to find ways to communicate with its most vigorous competitor. USA shale producers are pumping oils as much as possible without any signs of slowing down and stopping their surge.
They are now heading towards being the largest oil producers, aiming to surpass 12 million barrels in the next five years in order to be self-sufficient.
OPEC’s planned meeting with shale producers in Houston within the coming days will be under two absolute restrictions — no talks on oil price, and no volume restriction. It will otherwise face lawsuits in American courts. Perhaps they may discuss about their technology and other publicly known information.
OPEC now is facing a hopeless case, as American oil producers are going to eat into its market share within the next five years. At the same time, the oil market will be facing surplus situation again if it keeps its current production cuts, as other oil producers particularly shale oil will push for higher throughput.
The challenges are numerous for OPEC, as it has to keep Russia by its side as well as convince its members to reduce and adhere to its quota for perhaps few more years to come. Also, a growth in demand for oil will be witnessed for non-OPEC members. In the meantime, OPEC has to come to terms with itself regarding for how long it can keep the volume restrictions and pay for the utilized underground oil.
Saudi Arabia, being the biggest OPEC producer, holds the key. However, for how long can it sacrifice its volume limitations along with its colleagues, while watching others enjoy more volume and better profits on investments?
The current price level of $60 per barrel is fine for the time being. However, is it good for Saudi Aramco with its intentions to go international and to register five percent of its shares in major bourses?
The only way out is to seek other sources of income as Saudi Arabia is doing to avoid total dependence on oil. This is a long term vision, but for the time being it has to sail through Russia and shale oil producers.
Every oil producer is pushing for higher volume and better income from its expected unused resources, but they have failed to find alternative source of revenues due to which their future doesn’t seem very bright.
OPEC is walking on a tight rope. With discussions on volume and price, its talks with the shale oil producers will be of no use especially it is in Houston. It is the biggest taboo in our free world particularly with the USA authorities on the watch.
By Kamel Al-Harami – Independent Oil Analyst