• Wednesday, May 22, 2024
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Countdown: 24 hours to OPEC crunch meeting

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Tomorrow, Organisation of Petroleum Producing Countries (OPEC) will its 166th (Ordinary) meeting in what many see as a crunch meeting going by recent slump in the oil prices which has seen Brent benchmark price fall by as much as 30 percent since June this year.  Officials from oil-producing countries stepped up diplomatic visits before the group’s meeting, discussing how to react to the plunge in prices to a four-year low.

The drop in crude prices with the global benchmark trading at less than $80 a barrel has prompted speculation of an OPEC cut. Some analysts forecast that OPEC would cut production to shore up prices, while there are others who believe the oil cartel will not deviate from an official 30 million barrel-a-day production target. Further complicating OPEC’s task is the boom in US shale production, which has put the world’s biggest economy on course toward energy self-reliance.

OPEC, supplier of about 40 percent of the world’s oil, will meet tomorrow in Vienna to assess its collective output amid a supply glut.

OPEC underestimated resiliency of US oil production

OPEC was mistaken in thinking that US shale oil production would be unprofitable once crude prices slipped below $90/bbl, according to Pulitzer Prize-winning author Daniel Yergin.

Oil prices plunged, the result of a surge in shale drilling that lifted US output to a three-decade high, as OPEC output rose and there were increasing signs of slower demand growth.

US crude output rose to 9.06 MMbpd in the seven days ended November 7, the highest level in weekly data that started in 1983, according to the Energy Department’s statistical arm. US production will rise to an average 8.57 MMbopd this year and 9.42 MMbopd in 2015, the most since 1970, up from 7.46 MMbopd last year, the EIA said in its Short-Term Energy Outlook.

Iran may propose million-Barrel OPEC cut

Iran may propose that OPEC cuts its output target by as much as 1 million barrels a day to prop up prices. Bijan Namdar Zanganeh, Iran oil minister and  Ali Al-Naimi, Saudi Arabia’s oil minister will confer on the sidelines of the meeting in Vienna of the Organization of Petroleum Exporting Countries to define a common view among its 12 members for supporting crude prices.

OPEC easy-decision days over

The days when OPEC members could almost guarantee consensus when deciding production levels for oil are long gone.

Abdullah Bin Hamad Al Attiyah, former Qatari Oil Minister said the global glut of crude, which has contributed to a 30 percent decline in prices since June 19, has left the organization dependent on non-members to shore up the market.

“OPEC can’t balance the market alone. This time, Russia, Norway and Mexico must all come to the table. OPEC can make a cut, but what will happen is that non-OPEC supply will continue to grow. Then what will the market do?” Al Attiyah said.

Venezuela willing to cut oil output

Venezuela would be willing to cut its own oil production if OPEC decides to limit output when it meets tomorrow, Rafael Ramirez, Foreign Minister said.

Ramirez, who was until recently oil minister and president of state oil company PDVSA, declined to say what specific proposal Venezuela planned to take to theOPEC meeting in Vienna.

Ramirez, who serves as Venezuela’s representative to the group, just returned from a trip to OPEC and non- OPEC countries Mexico, Iran, Algeria, Qatar, and Russia to shore up support.

Financially strained Venezuela is pushing for higher prices to help it pay mounting arrears with private companies, debt payments and popular but pricey social programs.

Although Venezuela is a founding member of OPEC, the South American country’s pull has waned in recent years as production has flagged and it has shown little willingness to join in previous production cuts.

Non-OPEC Role

Russia, while not an OPEC member, said it will send Novak and Igor Sechin, head of state-controlled OAO Rosneft, the country’s largest crude producer, for meetings with OPEC officials.

READ ALSO: OPEC+ production cut might be extended as Nigeria struggle to meet quota

Two-thirds of global oil production comes from non-OPEC producers. Producers, particularly those pumping crude from shale formations would be concerned as much as OPEC about stability in crude markets and about finding a sustainable balance between supply and demand.

Global demand will increase this year by the least in five years, to 92.4 million barrels a day, before picking up in 2015 as economic recovery gathers pace, according to IEA.

OPEC has benefited from prices averaging $108 a barrel since December 2011, when the group changed its production target to the current 30 million barrels a day. Prices began sliding in June 2014. Oil markets are oversupplied by about 2 million barrels a day, and global economic growth is below expectations.

Frank Uzuegbunam