Opportunity Knocks For OPEC Oil Producers

Summit meetings of OPEC ministers generally generate a lot of threats and counter-threats between members before they sit down to talk and end with little disagreement.

By OPEC standards, the recent summit in Vienna was more like a major shift in tectonic plates as the world saw some of the richest nations flip sides and virtually form an OPEC Plus.

OPEC now comprises a dozen oil producing nations, mainly in the Middle East, and the OPEC plus, a wider cartel of oil producing nations led by Russia.

Sitting outside of this talk shop is America and some allies, such as Canada and the UK.

OPEC has a problem. Oil prices are lower than expected and the economies of the member nations are suffering.

Demand grows

The US and her allies aren’t helping because low oil prices mean fracking to produce shale oil has suddenly become profitable and weaning America off dependence on OPEC.

Although global demand for oil is growing, OPEC has tried to control the call for more oil to inflate prices – which is good for the OPEC economies but bad for everyone else.

Add to that a sub-plot of sanctions against Venezuela and Iran, and some of the other big producers like Saudi Arabia and Russia want to make a play for a larger market share at their expense.

That way, selling more oil to plug the shortfall means not cutting production to manage demand, but keeping it the same.

So, that’s why the world has seen Iran criticise Saudi Arabia for recently increasing production.

Grabbing market share

Both disagree over the other’s interpretation of the summit communique.

Saudi believes that the agreement gave them clearance to increase production to take up the slack left by Iran. Iran says OPEC rules say another member of the cartel should act in their best interests, not against them.

In the end, although they are a cartel when it suits them, the oil producing nations are all about securing their own economies.

Saudi Arabia increased production by 320,000 barrels a day in June – close to the highest level recorded of 10.7 million barrels a day in November 2016.