|According to recent reports in international media, OPEC is on the verge of breaking up. They claim that this oil organization will no longer be able to function especially after its recent failure in the Doha meeting in February because of disagreement among the OPEC members.|
It is a known fact that not all OPEC members agree on matters but they eventually reach an agreement over the outcome based on the majority. Disagreements are common in this petroleum organization but they are not indications of the breaking up of OPEC.
Yes, the OPEC meeting next month in Vienna will possibly end up not producing any resolutions and will call for further discussions and dialogue, but reaching any such conclusion will be impossible.
Actually no one is expecting any conclusion in the next meeting. Why should they when the oil prices are in a strong position at around $45 per barrel despite the failure of the Doha meeting? In fact, the price is now close to $48 per barrel and within the $50 range. Such a level was not foreseen three months ago and there has been an improvement of over $21 compared to last January.
When oil prices are at such a strong level, it would be better for OPEC to not meet and instead allow the oil market to perform its own magic without the interference of the organization. Therefore, why should they meet? Wouldn’t it be better for them to cancel the meeting in Vienna?
The demand for oil is increasing again. America’s gasoline consumption will soon beat last year’s figure of 9.65 million barrels per day. India’s demand for oil is increasing and will reach more than 4.5 million barrels per day, making it the fourth largest consumer in the world after USA, China and Japan.
The export market is currently down because of the fire in Canada, inability of Nigeria to increase its production, Venezuela facing problems with its local production due to power failures and Gulf oil-producing countries struggling to meet their local demands due to the increasing demand for electricity and water during the hot summer season. Therefore, the overall picture is rosy for the oil prices due to which it is better for all if OPEC does not meet next month. In fact, it would be better to not talk about the oil prices for the rest of the year.
Therefore, the oil organization will remain strong and flexible and it does not have to do anything in June to achieve the best results. It is better if OPEC does not meet or at least announce ahead of its meeting that neither the oil prices nor the production cuts are to be discussed.
The June meeting should be aimed to just greet OPEC ministers with big smiles on their faces under the assurance that the oil prices are not going to weaken and will hit the $50 level before the end of this year.
By Kamel Al-Harami – Independent Oil Analyst