Petroleum Africa
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Monday, February 15, 2016
Since its decision to maintain production output, and in some cases raise it, OPEC has stuck to its guns despite 18 months of a continuous downward spiral. That may be set to change as the cartel’s basket of crude prices are registering well under $30 per barrel for the past month, even hitting a price of $22.48 on January 20 before easing back up a few dollars.
Word has it that the last OPEC meeting was a bit tense as many of these member countries rely on their respective crude revenues to support their budgets. The general consensus was that a decision to rein in production was needed, despite Saudi Arabia’s history of bullying other members into maintaining the status quo.
Nigeria’s oil minister, Emmanuel Ibe Kachikwu told Reuters that there was “increased conversation going on. I think when we met in December … they (OPEC members) were hardly talking to one another. Everyone was protecting their own positional logic.”
Saudi Arabia has been flexing its production muscle in an effort to drive prices down to grind the US’ shale production to a halt, as producing shale oil is more expensive than conventional oil production, the lower the per barrel price the less economic for shale producers. The problem with Saudi’s stance is production in the US does not support the whole country as it basically does in Saudi. In other words the oil that it drills funds roughly upwards of 75% of the Saudi palace budget, which covers education subsidies, low-priced energy, housing allowances, and other benefits, not to mention the lavish lifestyle of the multitudes that make up the Saudi royal family.
There have been calls for an emergency meeting although Kachiwku said they have been reluctant to hold one unless there was every expectation that they would have a consensus assured to ease back on the taps.
“A lot of barrels are tumbling out of the market from non-OPEC members, so the Saudi philosophy is obviously working. But it’s not influencing the price higher, which means that whether we like it or not some barrels are coming in from … members and non-members to cover whatever is dropping out,” Kachikwu was quoted as saying in a Reuters interview.
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