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“Time of oil cartels has passed”

Oil&Gas Materials 5 October 2015 14:50 (UTC +04:00)
The time of OPEC or any other oil cartels has passed, Joshua Noonan, Post-Soviet analyst and expert, Presidential Management Fellow at U.S. Department of Housing and Urban Development believes.
“Time of oil cartels has passed”

Baku, Azerbaijan, Oct. 5

By Aygun Badalova - Trend:

The time of OPEC or any other oil cartels has passed, Joshua Noonan, Post-Soviet analyst and expert said.

Inactivity of OPEC amid the continuous oil prices fall has led to the rise of allegations about the loosing by cartel its relevance on the world oil market. The need for cooperation between OPEC and non-OPEC countries as well as the suggestion to create an alternative to OPEC are being more frequently expressed.

Such a proposal has recently come from Kazakhstan. The country suggested either transforming the current OPEC, or setting up a new organization that includes all countries producing 1 or 1.5 millon barrels per day, to control worldwide oil production.

"While the Kazakh's efforts should be applauded, the time of OPEC or other oil cartels has passed. This is due to the multitude of producers," Noonan told Trend.

He believes Saudi Arabia, which is the largest oil producer and exported within OPEC, is currently trying to eliminate unconventional oil production seen in hydraulic fracturing through overproduction.

"This will eliminate the weaker producers, but I am certain that lower prices are here to stay and market concentration to allow OPEC to continue functioning is non-existent," Noonan said.

With regard to the cooperation between OPEC and non-cartel countries, especially with Russia, he sees it as highly unlike scenario due to different goals the parties have.

Russia wants higher prices through constricted production. OPEC's lead producer Saudi Arabia wants to drive out the frakers - so cooperation is highly unlikely, he believes.

Currently, OPEC's quota for oil production is 30 million barrels per day. However, the member states do not comply with this quota.

Saudi Arabia and other Gulf states pushed OPEC's strategy shift last year to defend market share rather than cut output to support oil prices, which experienced a historic fall as US oil prices fell below $40 a barrel on Aug. 28 for the first time since the 2009 financial crisis.

OPEC last met this summer in Vienna, when it agreed to leave its production ceiling unchanged at 30 million barrels per day. The next meeting of the cartel will take place on Dec. 4.

OPEC oil production averaged 31.544 million barrels per day in August, compared to 31.531 million barrels per day in July, according to the organization's Monthly Oil Market Report published on September 14.

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