Next step is to gradually balance supply
Oil consumers agree that the price level of $80 per barrel is too high and has to be adjusted soon. This is what OPEC and Russia are doing to bring order to the oil markets and some relaxation on the production volume. This is currently being achieved and will be implemented during the meeting of the oil organ i z a t i o n end of next month. The question is how much oil should be pushed to the market – one million barrels or more? How and when? OPEC, Russia and the rest of oil producing countries agreed unanimously that the $80-level is hard to swallow with a jump in oil prices within just 17 months of the OPEC agreement.
Also, OPEC did not intend for the prices to reach this level so soon. Everyone realizes that any level of oil beyond $75 will hurt consumers as well as producers by almost the same degree. Besides, it was neither OPEC’s nor Russia’s intention for the barrel to reach beyond $65 at the beginning of the agreement.
The cut of 1.8 million barrels per day for 17 months ago is intended to get rid of surplus oil in the main consuming centers of the world. Now that this has been achieved, the next step is to gradually balance the oil supply and bring the oil prices to an acceptable level that will benefit all.
There is an understanding between Saudi Arabia and Russia in realizing that the time has come to work out the supply arrangements, taking into consideration the Venezuela oil problems and the need to pour more oils but gradually and without disturbing the balance that is managed by OPEC’s accord of 2017.
Finally, OPEC has succeeded in bringing order in the oil markets and reducing the oil prices. The same organization must manage oil market’s stability in the future in the same manner, ensuring satisfaction of the consumers and the producers equally. Of course, oil prices will hit $ 80 a barrel but not so soon.
By Kamel Al-Harami
Independent Oil Analyst
email: naftikuwaiti@yahoo. com