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THE oil organization is meeting on Sunday to decide on the action to be taken in the coming month. It will decide whether to maintain the current oil production cut of two million barrels or further reduce the production, without offending its new ally Russia, which is dealing with its own battle with the European countries and G7.
It is working on determining what to do with the Russian oil and gas supply, either face complete boycott or agree on a price cap of its sale of oil to the world. The challenge stems from the fact that any agreement will certainly impact all members of the organization, as it sets precedence in interferences and in forcing fixed prices on any country in the future.
This will certainly scare all members of any organization, as it means setting the oil and gas prices for the future, as early as Monday after OPEC+ ends its meeting. OPEC+ will not be in a comfortable position during this meeting. They had to change the method of the meeting from an online virtual session to a direct face-to-face meeting with oil ministers, while avoiding challenging and hard questions from the global media at the same time.
The oil group was trying to get a price target level of $90 a barrel, but this did not happen despite its huge production cut of two million barrels per day from last month. In fact, the price went down, staying within the level of $82 – $85, which has been hurting most of the OPEC+ economies due to their ambitious developmental plans and projects.
The other fact is that the reduced production of two million barrels is not happening in reality, as the actual figure is about one million barrels. Many of the OPEC+ members do not have the capacity to reduce further, while Russia is not producing at full capacity in anticipation of higher oil revenues to support its invasion of Ukraine. In addition, the group must review the arrival of new barrels of Venezuelan oil into the USA market and its impact on global price. It must determine what action is needed to be taken or if it should postpone its reaction to next month’s meeting.
Should they decide on monthly meetings, which seem necessary considering the current situation, and with Europe’s decision to review Russia oil cap price every two months? Nevertheless, Sunday’s decision will not be complete in the absence of the European Union agreement on how to cap the Russian oil price and at what level, or whether it is in line with the market price and reaction. Many questions are yet to be answered and OPEC+ must seek clarifications.
Any decision it takes must be coordinated and agreed upon by the “big +” of OPEC. Today’s meeting will be unlike the previous ones, as it will touch all its members. It imposes a new challenge and better coordination with all both inside and outside the organization, and with hope at the same time that it will ensure that a level of $90 per barrel will be maintained.
By Kamel Al-Harami Independent Oil Analyst