|The OPEC meeting to be held in Vienna next Thursday will be very quick; the members should be home the same evening. They basically will agree on extending the current crude-oil production cuts for another nine months, and they will leave Vienna soon after.|
The agreement reached last week between Russia and Saudi Arabia to continue with the production cuts was known to the market. However, the decision to extend by another three months until the end of the first quarter of next year was not expected. It is a very wise move that indicates the commitment of the two biggest producers to ensure stable oil prices, and their joint determination to balance the market, if not manage it. These two producers control about one-fifth of the world supply. Such a move reveals their solidarity in preserving fair and just oil prices.
For the first time, the openness and sincerity of OPEC and non-OPEC members for a fairer and stronger price for their commodity, and their determination that it must have real value and should be above $40 per barrel were shown through the last-November agreement. However, USA’s shale oil production did spoil the OPEC-Russia party and seriously began taking advantage of the global growth of oil by more than 500,000 barrels per day, leaving OPEC with less than 300,000 barrels to share among its members.
Of course, the oil price did improve by $15 per barrel compared to last year as a result of the November agreement, but that was all.
The overall surplus of more than two million barrels is taking too long to be consumed, due to which all agree that a further six months, if not longer, is required.
Therefore, for OPEC and Russia, their priority is to stabilize the oil market for a long period.
By Kamel Al-Harami
Independent Oil Analyst