Monday Oct 15, 2018

PetroEnergy Information Network

Sunday / 6/10/2018 12:00:00 AM / 14:37
Service : Oil
News Id : 283202
Reporter : 763

OPEC not Run by US nor Russia

(Sunday, June 10, 2018) 14:37

TEHRAN (Shana) -- It was three and a half years ago, during the last month of fall 2014. Ali Al-Naimi, former Saudi Minister of Petroleum and Mineral Resources, supported by his allies, blocked output cut efforts of the Organization of the Petroleum Exporting Countries (OPEC) and restored the organization’s total production to the ceiling of 30 million barrels per day. Saudi Arabia did this with two goals in mind: to boost its market share and counter any production increase in US Shale. Ali Al-Naimi had fervidly stated his goals in an OPEC meeting which was held behind closed doors. Afterwards, the oil price started to plunge drastically, slipping from $100 per barrel to $70 and it was expected to continue plummeting even further. Simultaneously, other OPEC members including Algeria and Venezuela tried to convince OPEC to cut the output by 1 million barrels a day in an attempt to arrest the ongoing slide.

However, Saudi Arabia stubbornly insisted on its position and finally, OPEC agreed to keep the output intact. The Oil prices plummeted even further, reaching record lows of around $30 per barrel. Unlike Saudi Arabia's initial assumption, the US Shale production not only did not decrease but reversely it began to increase after a period of fluctuation.

1-Such historic experience is before us. Now, under the US duress and in line with sanctions on Iran and Venezuela, Saudi Arabia and some of its allies are trying to jack up OPEC production by 1 million barrels per day, overlooking the fact that the supply-cut agreement, struck by OPEC and non-OPEC producers during the past one and a half years, was basically designed to maintain the balance in the prices. In his interview with Reuters, Iran’s OPEC governor, Hossein Kazempour Ardebili, made important remarks which sparked worldwide attention. He said that the US request for Saudi Arabia to pump more oil so that it could cover a drop in Iranian exports was “crazy and astonishing”, adding that OPEC was unlikely to welcome the appeal as no one in OPEC would act against two of its founding members. He also reminded that during the previous round of sanctions against Iran the oil prices got to $140 a barrel. Now, how can Iran maneuver?

2- The fact is that in OPEC oil barrels have the final say in everything. A country’s power is measured by its production and inventories. However, this is only a part of the truth. Lobbying, running an effective diplomacy as well as making efficient use of organizational identity are equally effective means. Senior Iranian energy officials have to actively lobby other OPEC ministers during OPEC two-day seminar, that is slated to be held before OPEC 174th meeting. Some OPEC members will gain nothing from supply increase, or at least they are going to take little from that. Iran can work with Algeria and Venezuela to convince Equatorial Guinea and Ecuador to endorse their proposals in the organization. This way would help the public opinion not to think that the US is actually running the organization. Iraq and Qatar can be potentially helpful, too. Apparently, Kuwait is also not happy with the attempts to annul the output-cut agreement before the end of 2018. One of the major works of Iranian petroleum officials during OPEC seminar is to align with these countries and other OPEC members, and should they fails to attend the seminar, a significant diplomatic chance is to be missed.

3-There have been calls by some OPEC members to increase the supply at least by 300000 or 400000 barrels, should they fail to convince the others for 1000000 barrels increase. However, they are ignoring that any such move will sink the historic supply-cut agreement into oblivion. President Rouhani is now in China. He is expected to meet Putin, Russia’s president, on the sideline of SCO summit. It seems to be a good opportunity for the president to discuss with Russia about the necessity of maintaining the supply-cut agreement. Russia is the most important non-OPEC producer of this agreement. However, it is not an OPEC member. This is crucially important for everyone to know that neither Russia nor the US is running the organization. OPEC has 14 members and decisions should be made with the consensus of all members while taking into consideration interests of all members. We are waiting to see once again the unity displayed by the most influential organization of the third world countries. OPEC members can make use of past lessons when everyone benefited from working together, and when all were harmed by the members’ disunity. The oil prices slipped to $30 at the time of disunity, but it got to $70 when united voices raised by all members.

 

By Reza Zandi

The Persian version of this article was originally published in Hamshahri Daily. 


Email is required
Characters left: 500
Comment is required