The recently concluded OPEC meet dispersed without committing or deciding on any further oil production cut. The informal meet witnessed stark differences of opinion between the US allies including Saudi Arabia and the adversaries of the US policies, Iran and Venezuela.
Raad Alkadiri, a senior energy consultant said these were testing times for the organization, and the members should function in cohesion to overcome the crises. His words reflected off a looming friction within the OPEC member states. The members left the informal meet in Cairo without ironing out differences in how much each member should reduce production.
OPEC is contemplating further cuts due to sliding demand for oil particularly from the US and China. OPEC President Chakib Khelil stated that some countries were not able to sell their output due to lower prices. Therefore, the crude should be taken off the market as it was oversupplied, he added.
Oil demand is expected to further come down owing to increased oil exploration and extraction projects in India, Brazil and several other non-oil producing nations. Increased governments’ subsidies for alternative energy sources which are helping renewable energy to become affordable are also denting the demand for oil.
Any further drop in oil prices will reflect adversely in the books of major oil companies including Gasprom as most of the companies are engaged in mega expansion projects. Analysts predict pro-active measures to revive the global economy have to be taken into consideration rather than resorting to narrow means of cutting oil production. Lower output would not help the oil producing countries much unless the prices reached above $100 as lower production would only bring money equivalent to the amount received through current productions, they added.
OPEC is hoping a repeat of success they achieved during 2006 and 2007 through production cuts while prices fell then. A decision on production cuts or related measures will be arrived when the members meet on December 17 in Algeria. However, it is not known whether special guests from other oil producing nations outside OPEC including Russia will be invited for the event to derive a comprehensive look at the issue.