(MENAFN- Arab Times) One must ask what if OPEC agrees to cut oil production by two million barrels with the biggest share between Saudi Arabia Kuwait and United Arab Emirates? Would oil prices remain strong and within the range of $90 per barrel; thereby making everybody happy without losing about 50 percent of its value or the countries losing income by the same percentage?
These are fair and honest questions. However the more expensive oil producers would have to continue to drill explore and produce more oil at the expense of OPEC's market share. This will again force the oil organization to move towards further cuts and weakening of oil prices. Oil prices range from $55-56 per barrel despite today's scenario of oil surplus in the market. Under such circumstances there is not much impact whether oil production is reduced or not. The only difference is that the losses were incurred two months earlier. For sure oil prices would have remained strong for a while if OPEC decided to reduce production but oil prices had to come down in any case; so OPEC took the right decision and others must cut either way. Today we still see more oil coming into the market and it will continue to be so. Iran is expected to reach an agreement with the USA to lift oil sanctions soon and Iraq will maintain its oil expansion policy. Libya is waiting and it will certainly witness further weakening of oil prices until the end of the year. In the meantime OPEC must put its house in order. It must seek full cooperation with non-OPEC members particularly Russia and Brazil. Without their cooperation the price of oil might even go lower than $40 per barrel. With too much oil in the market too many producers fewer lifters and limited market outlets; the world economy remains weak and it has yet to awaken. Today the oil market faces a real challenge posed by many weak elements and a single producer cannot manage it. Saudi Arabia might be able to but it has to make many sacrifices like reducing production by more than three million barrels and losing its market share. This time Saudi Arabia is not willing to take or play that role alone and it will not act alone. We have a long way to go and it is correct that OPEC took the right decision last November. There is no ambiguity in the stand of three Arab Gulf States and other OPEC members must adhere to it and respect it. Email:
By Kamel Al-Harami
Independent Oil Analyst By: Kamel Al-Harami
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