Opec Secretary-General Mohammed Barkindo’s statement yesterday that an extraordinary meeting of the organisation could be convened if talks at an informal meeting in Algiers this month reach a consensus has revived hopes of stabilising the oil market. Opec has found itself helpless as oil prices kept crashing, but this helplessness was due to a lack of determination and consensus among members on addressing the crisis, and also due to the new market realities caused by a huge jump in the quantum of oil flowing into the market from the non-Opec producers, thus restricting the potential for manoeuvring by the Opec members.
The forthcoming Opec meeting is important because the market is looking for desperate solutions. On Friday, the price of Brent, the global benchmark, fell to a one-month low of around $45 a barrel, and finished down for the third time in four weeks. As always, the rising supply has been the villain. According to reports, some producers are likely to increase output, especially Libya and Nigeria which have been hit by political turmoil.
Optimism is not high about the prospects of a deal very soon, but there is a realization among all Opec and non-Opec members that the current situation is not sustainable.
It’s commendable that Opec has become realistic about its expectations because days of high oil prices are over. Barkindo says the group is not seeking a definite price range for oil but stability for the market. Wild fluctuations in prices and reckless production don’t help anyone and market discipline is what producers need.
The current market is bad not only for producers, but for the global economy as a whole. There was hope in consuming countries that low prices would benefit the common man, but that is proving to be a dream as some governments have increased taxes on petrol and diesel, reaping an unexpected windfall, and keeping the prices astronomically high when compared with the international prices. And that’s true of India too, which is one of the biggest consumers of petroleum products in the world. And the rock-bottom prices are hitting both Opec and non-Opec producers equally hard, though, unfortunately, the duty of stabilizing the market has fallen on the Opec, while the rest have been behaving recklessly with unrestricted output, wrecking Opec’s efforts to bring some sanity to the market.
Algeria’s Energy Minister Noureddine Bouterfa last week said that there was a consensus among producers about pushing for a price around $50 to $60 a barrel. That’s a modest and achievable target to start with.
