Because of Saudi Arabia’s decision to abandon oil production restrictions, OPEC may not celebrate its 60th birthday this year, OPEC chief analyst said.
Chief analyst Julian Lee explained that the Saudi decision, "which was motivated by the love of appearing strong, tore down the OPEC Plus production agreement that started in 2017."
He pointed out that Riyadh was seeking to compel Moscow to back down from its decision not to further reduce production, but this endeavor was counter-productive.
Julian predicted that the current OPEC situation and oil prices will put more pressure on OPEC members other than Saudi Arabia, "from Algeria to Venezuela."
All-out oil war
Julian said that the de facto leadership of OPEC - Saudi Arabia - could have taken other calculated options, before deciding that every member of the organization would do what it wanted and spark an all-out oil war.
Ultimately, Russia offered to extend the current production cuts beyond the end of this month, and there was no reason for the 13 OPEC members to agree to further cuts between them.
Julian adds that it appears that Saudi Arabia has decided that the "OPEC Plus" agreement, which started its life as a force for temporary solidarity work for only six months, should continue until its fourth year.
|Saudi Arabia - according to Bloomberg report - shows more oil than it produces (Reuters)|
And if OPEC's external partners, like Russia, are not ready for further cuts, OPEC will not make any cuts either.
Since not everyone held direct meetings, the current agreement will not be extended, and at the end of this month, everyone will be free to decide the quantity they want to produce, according to the author.
Aramco offers more than it produces
Saudi Aramco says it will supply its customers with 12.3 million barrels per day in next April, and this is more than the company can pump from its wells, even if the taps are opened completely, which means that it will withdraw some of the crude stored at home or its stores in Japan, the Netherlands and the coast The Mediterranean in Egypt.
Julian says that while Riyadh can partially offset the collapse in oil prices by increasing production, most OPEC member states are much less fortunate, as they cannot pump more than they currently pump.
The writer pointed out that this is not the first time that Saudi Arabia has "cast the smallest OPEC producers into the wolves", and its current unprecedented blow to oil demand shows its real disregard for the rest of OPEC members described as the most successful producer organization in the world.
|Aramco said it would provide its customers with about 12.3 barrels per day (Reuters)|
Measures inconsistent with OPEC
The writer said that when OPEC was formed in 1960, part of its main goal was to "protect the interests of member states individually and collectively", and this goal remained extremely important in its amended statute in 2012.
Also, "eliminating harmful and unnecessary fluctuations" in oil prices was an important matter for the organization, so the recent measures for Saudi Arabia are totally inconsistent with those goals, and they have led to a drop in oil prices by almost 40% during a little more than a week, and this is certainly not in The collective interest of OPEC members.
Julian considered that OPEC is useful to Saudi Arabia only when it wants to use it as a blueberry card to increase oil prices, and now that it wanted to push its partners down, OPEC has become a source of inconvenience.
OPEC has in the past escaped internal differences that are difficult to solve, but this time its deliverables may be out of reach, according to the author.