Petroleum Exporting Countries (OPEC)

OPEC Production Freeze Could Raise Oil Prices To $60 – Analysts

ABUJA (Sundiata Post) – Latest push by Russia to reach agreement with the Organisation of Petroleum Exporting Countries (OPEC) may lead to oil price stability as President Vladimir Putin is keen to reach an agreement with the cartel to freeze oil production in hopes of prices regaining strength.
Russia is struggling economically, as it leads the world in energy exports and oil comprises 40 per cent of its revenue.
The country is considering tax reforms on oil companies, potentially hurting the industry further and this could lead to job cuts and shutting down of decade old wells.
With the U.S. shale boom supplying most of North America, OPEC has increased production to maintain their market share.
This has caused massive price reductions, putting many countries at a loss. Two years ago crude oil was priced at around $100/barrel, but in today’s inundated market it rests below $50.
“I would very much like to hope that every participant of this market that’s interested in maintaining stable and fair global energy prices will in the end make the necessary decision,” said Putin.
Iran’s sanctions were recently lifted, allowing it to reenter the oil market and resume production.
World leaders agree that Iran needs to continue growth and shouldn’t be included in this production freeze.
To remain at the crippled production level would constrict Iran’s GDP growth, which is now being forecasted as high as 6 percent.
Saudi Arabia sees Iran as a competitor and if Iran is able to restore production to a level that is similar to that of before sanctions were imposed, Saudi Arabia could stand to lose some of its market share.
Saudi Arabia produces over 10 million barrels/day and continues to steadily grow.
Last month the country set a record of 10.69 million barrels/day while Iran has been fixed at a level just below 3 million barrels/day but has quickly regained a footing.
As at August Iran was producing 3.6 million barrels/day, an impressive amount having only been without sanctions since January.
Other OPEC members such as Iraq, Nigeria and Libya are debating whether or not to halt production.
A freeze doesn’t offer many incentives and will result in a cut in revenue and increase in the unemployment rate.
Terrorist groups have been attacking many pipelines, specifically in Nigeria, making production difficult as it is.

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