OPEC not ready to support prices
Baku, Azerbaijan, Oct. 5
By Aygun Badalova - Trend:
OPEC is unlikely to shift strategy in its December 5th meeting as internal disagreements remain in place, analysts from the US JP Morgan bank said.
Analysts believe that OPEC is not yet ready, willing, or necessarily well-advised to shift strategy to support oil prices.
"Internal disagreements still seem prevalent, and there remains no credible buy-in from non-aligned petroleum exporters, e.g. Russia, despite ongoing discussions," analysts said in a report obtained by Trend.
Analysts stressed that Middle East OPEC members appear better placed to manage the impact of lower oil prices versus their African and Latin American counterparts, where fiscal balances have deteriorated.
Countries such as Saudi Arabia, the UAE and Kuwait have significant structural buffers, such as low public debt e.g. 1.6 percent of GDP in Saudi Arabia at end-2014, very high capital reserves and assets managed by Sovereign Wealth Funds, which has forestalled the speed of adjustment necessary, analysts said.
However, other less well positioned members are required to adjust policy to reflect the harsh realities of a price at $45 a barrel, analysts said.
"Some Middle Eastern governments have started to tackle energy subsidies, typically a substantial drain on government resources, but progress elsewhere is more muted," they added.
JP Morgan analysts expect OPEC oil production to amount to average 31.5 million barrels a day in 2015 and 32.2 million barrels a day in 2016.
Currently, OPEC's quota for oil production is 30 million barrels per day. However, the member states do not comply with this quota.
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.
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.