OPEC’s Algeria meeting could bear fruit, says expert
Baku, Azerbaijan, Aug. 15
By Elena Kosolapova – Trend:
The informal OPEC meeting which is expected in late September in Algeria could bring oil output freeze agreement, Jim Krane, an energy analyst at Rice University’s Baker Institute in Houston, believes.
“Clearly oil prices have been too low for too long, from an OPEC perspective,” Krane told Trend by email.
The expert noted that while the Saudis are increasingly focused on increasing their share of the global crude oil market, that does not mean they are not interested in the price of oil.
“If there is something Saudi Arabia can do to encourage a higher oil price – something that doesn't derail their long-term goal or cause excessive pain – I would expect them to do it,” he said.
At the meetings with other major oil producers in April and June, OPEC discussed the possibility of output freezing to maintain oil prices. However, the parties failed to reach an agreement.
According to OPEC, global oil supply increased by 0.24 million barrels per day (bpd) to average 95.14 million bpd in July 2016 as compared to the previous month. OPEC increased oil output by 46,400 bpd to 33.11 million bpd in July as compared to June.
Krane also noted that since Saudi Arabia and the other big exporters are at or near all-time production highs, it makes sense for them to cap production.
According to the expert, Saudi Arabia is now nearing the end of its peak summer demand season, where it consumes huge amounts of crude oil in power generation.
“Besides, it seems logical for Saudi Arabia to cooperate with Iran, which has also reached a production plateau, and now needs investment to raise production further,” he said.
Krane believes that despite their deep political differences, the interests of Saudi Arabia and Iran converge and both could benefit from a "strategic pause" in their quest to increase production and capture more markets.
“Therefore it is possible that the upcoming OPEC gathering in Algeria could bear fruit. We could see some sort of agreement on output, if only symbolic, like the proposed ‘freeze’ on production,” he said.
Edited by EA
Follow the author on Twitter: @E_Kosolapova