OPEC demonstrates it has no power
A regular meeting of the OPEC countries has recently took place in Vienna.
The new possible limit of 32 million barrels per day was on the top of agenda. However, the parties failed to reach an agreement.
The only noticeable results of the meeting were the election of OPEC's Secretary General, Abdallah Salem el-Badri from Libya who replaced Mohammed Barkindo Nigeria and return of Gabon into the oil organization.
A correspondent of ‘Vestnik Kavkaza’ interviewed experts who agreed that the organization has lost its importance.
A leading analyst at the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation Igor Yushkov drew attention to the fact that the news about the failure of the Vienna talks had only a brief impact on the markets.
"We saw that oil prices fell yesterday below $49. But after that they began to grow again after the information that oil production in the United States was reduced again, commercial stocks also decreased. So the effect lasted for half a day," he said.
‘‘But this scanty effect is explained by the fact that everybody understood that they would fail to agree. They even failed to come to an agreement in Doha with the participation of non-OPEC countries, which are responsible for more than half of the world's oil production. OPEC controls only 40%," the expert added.
Igor Yushkov agreed with the head of Saudi Arabia’s Ministry of Energy, Khaled Al-Faleh, that the upcoming OPEC’s loss of influence will affect markets processes. "I think it has already happened. In fact, they want to keep a smile during a bad game. Everybody understands that OPEC cannot influence the price. What is the purpose of the organization? Main oil producing countries adjust their production volumes and, accordingly, change the supply and demand balance. They reduced production volumes and the price increased. Now we can see that not a single element of this strategy works because OPEC controls only 40% of all global oil production. If you reduce oil production and one of the non-members of OPEC, for example, Russia will increase its production it will receive your share on the market. It does not work anymore. So, OPEC is not a dominant organization because it does not unite all oil producers anymore,’’ he explained.
Senior analyst at ‘Uralsib Capital’ Aleksey Kokin also noted that the market did not expect much from this meeting. "In general, it brought nothing. Basically, they should not have wasted their time,’’ he said.
The expert also agreed with the Saudi minister’s opinion, adding at the same time that he was ‘‘probably talking about the current situation, not future." "Certainly, all members of OPEC influence oil prices, but some time ago the organization stopped operating in the market as a united power. The necessary quotas were not restored at the meeting. In fact, anyone can produce as much as he wants,’’ Kokin said.
"I think that OPEC members have not come to a unanimous opinion that the organization is no longer needed, it cannot regain its power. Maybe they still think that it is all temporary. But there are serious disagreements between blocks and groups within the organization. Maybe some time later some members will leave the organization. It is also possible that some of them will form a new group to coordinate their actions, for example, Saudi Arabia, Kuwait, the UAE,’’ senior analyst at ‘Uralsib Capital’ noted.