Diezani Alison-Madueke: "Almost All OPEC Countries Very Uncomfortable"
A schism continues to develop in the once closely knit group that is known as the Organization of Petroleum Exporting Countries (OPEC).
OPEC, which counts twelve states (Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela) as members, is not the homogenous group that it used to be.
In one corner you have the "Arab bloc", which is led by the most influential member of the group, Saudi Arabia. Saudi Arabia, along with nations such as Kuwait and UAE, have decided to take a "long-term" approach to oil prices. The North American shale oil industry has increased the supply of oil in the world and the "Arab bloc" is doing their best to dismantle it by refusing to cut their daily production quotas. This refusal to budge has resulted in the price of oil dropping by roughly 30% since mid-November - the "Arab bloc" has decided that they want to reduce the supply of oil by damaging the North American shale oil industry by keeping prices low. Low oil prices make many North American ventures unprofitable and this will, in theory, result in lower supply in the future.
In the other corner you have nations such as Venezuela and Nigeria which desperately need oil prices to be at a certain level in order to maintain some level of fiscal health. Diezani Alison-Madueke, who is a Nigerian national and President of OPEC, is the person responsible for calling emergency meetings of the group.
Alison-Madueke went on record earlier today and said that if the price of oil slips any further, "it is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so." This meeting would surely have one intention, at least from the standpoint of nations such as Nigeria and Venezuela - to cut production quotas which would lift the price of oil.
The problem, however, is that OPEC's power lies with nations such as Saudi Arabia. Saudi Arabia has already stated that they have no problem with low oil prices, as they are taking the long-term view of the situation. Suffer now, they say, and reap the rewards later. Saudi Arabia has stated that they would have no problem if oil reached as low as $25/barrel.
In fact, Venezuela has protested very loudly about OPEC's refusal to cut oil production quotas. The problem for Venezuela, however, is that they don't have much pull in the group. Lower oil prices have plunged some member nations into disarray and they are surely increasingly hostile towards the stance to keep production quotas the same.
Other nations, including Russia, are surely hoping that OPEC decides to cut production quota levels at a future "extraordinary meeting". Don't hold your breath, however, as Saudi Arabia has made it plainly clear that they are digging in their heels.
Source: CNN Money - Scared OPEC Members Want Meeting, But Saudis Call The Shots
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