OPEC mulls emergency meeting amid low oil prices
Many OPEC members say the cartel may have to call an emergency meeting production and prices because of the damage the collapse of oil prices has been doing to their countries鈥� economies. But the prospects of such a gathering seem remote.
Diezani Alison-Madueke, Nigeria鈥檚 oil minister who now holds OPEC鈥檚 rotating presidency,听, 鈥淎lmost all OPEC countries, except perhaps the Arab bloc, are very uncomfortable.鈥�
This discomfort comes just three months after OPEC鈥檚 last meeting, in November, in which, under Saudi pressure, the group decided to听, and maintain a production ceiling of 30 million barrels per day that has been in place for three years.
It eventually emerged that the strategy, evidently conceived by Saudi Oil Minister Ali al-Naimi, was to abandon OPEC鈥檚 traditional approach of lowering production to keep prices high, and instead to defend market share against oil producers such as Americans using newer, if more expensive, means of extraction such as hydraulic fracturing, or fracking. ()
In January,听听that his aim was to drive oil prices low enough that such 鈥渋nefficient鈥� production methods would cease to be profitable. But while that approach is having some success, it does little for the budgets of many OPEC members.
Particularly vulnerable OPEC members are Venezuela and Iran, who pressed OPEC鈥檚 leadership for a production cut before the November meeting and听.
础濒颈蝉辞苍-惭补诲耻别办别听听that if the price of oil slips below its current $60 per barrel, 鈥渋t is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so.鈥� She said she鈥檇 been discussing the possibility with other members of the group. She added that she hoped, but couldn鈥檛 be certain, that the price of oil could stabilize at its current $60.
听
Yet a meeting seems unlikely, if for no other reason that it must have the approval of all 12 member states, and Saudi Arabia is certain to veto such an idea,听. It probably will be joined in opposition by other Persian Gulf members that already are听, even if they have to adjust their budgets. ()
Another reason: Saudi Arabia and probably all other OPEC members are aware that if production is cut and prices rise,听听when fracking became unprofitable and resume production that could only feed the existing global glut in crude.
Finally, there鈥檚 the possibility that Alison-Madueke鈥檚 comments on an emergency meeting were motivated primarily by domestic politics in Nigeria. A higher price for oil would help the country, Africa鈥檚 largest crude producer, because normally it provides the government with about 80 percent of its revenues.
Yet at the same time, Nigeria鈥檚 presidential elections have been postponed from Feb. 14 to March 28 in an effort to prevent disruption from the terrorist group Boko Haram. As a result,听, 鈥淸I]t is difficult not to discount [Alison-Madueke鈥檚] statement as playing to the domestic audience.鈥�
And one听听that while Alison-Madueke is addressing Nigeria鈥檚 electorate, 鈥渢here are no concrete actions going on to organize any emergency meetings of OPEC countries.鈥�
By Andy Tully of Oilprice.com
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