Baku, Azerbaijan, Dec. 3
By Umid Niayesh - Trend:
The Organization of Petroleum Exporting Countries (OPEC) is still actually supporting the members' long-term interests, Anne Korin, an energy issues expert said.
"Saudi Arabia has about $750 billion in cash reserves, which explains their willingness to tolerate lower prices and thus deficits now in order to drive unconventional oil producers in the US out of business and stem the growth of this additional supply to the market, Korin, who is co-director of the Institute for the Analysis of Global Security (IAGS) told Trend Dec. 3.
"One can thus expect oil prices to rise quite significantly within the next two years," she added.
Korin, who serves as an adviser to the United States Energy Security Council said, "in this sense the cartel actually is supporting its members interests, making that calculation that some short term pain is worth the eventual gain."
However she noted that the OPEC members require different prices of oil to balance their national budgets.
"Pricing doves such as Saudi Arabia still require quite high oil prices for budget balancing but not as high as pricing hawks such as Venezuela and Iran require," she explained.
The long-term comfort level for both hawks and doves is oil above $100/barrel, she said.
The price of OPEC basket of twelve crudes stood at $68.13 dollars a barrel on Dec. 2, compared with $66.44 the previous day, according to OPEC's official website.
The price dropped $4.36 to $66.44 per a barrel on Dec.1, compared to Nov.27 as of the OPEC members failed to cut oil output. OPEC oil basket price was $107.89 in mid-June, but has been in dramatic decline, especially after October.
OPEC members held a meeting in ministerial level on Nov.27 to evaluate the global oil market and the falling of the oil price by more that 35 percent since June.
Despite the ceiling level of 30 mbpd by OPEC, 12 members of this cartel produced 30.253 mbpd in October, according the OPEC's latest monthly report. This is while OPEC says that the demand for OPEC crude is estimated at 29.5 mbpd in 2014. In 2015, the figure is estimated to reach 29.2 mbpd.
Saudi Arabia as the biggest OPEC producer isn't keen to keep oil production low to protect their share in international markets.
The IMF has estimated Saudi Arabia will need an average oil price of $90.70 a barrel in 2015 to balance its budget; the United Arab Emirates would face a level of $73.30, Kuwait $53.30 and Qatar $77.60. Oman and Bahrain need much higher budget break-even prices.
Umid Niayesh is Trend Agency's staff journalist
Follow him on Twitter: @UmidNiayesh