Just over a week before the meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, the first official exchanges of intentions begin among the countries. While Saudi Arabia and Russia had argued that it is necessary to increase oil production (they have the capacity to do so) so that prices do not hinder demand growth, the first country has already appeared that has openly said «no» to pumping more crude.
- Saudi Arabia and Russia advocate producing more oil
- Countries with less capacity prefer to maintain cuts
- The price of Brent crude rises and seeks 77 dollars
Iraq's Oil Minister, Jabbar Alluaibi, defended on Monday that OPEC member countries should not yield to pressures to increase crude production, according to what the Reuters agency has learned.
Brent crude reacts with increases of 0.51% that bring the barrel closer to 77 dollars per unit, while West Texas crude advances 0.81% to 66.2 dollars per barrel.
Meanwhile, sources from Saudi Arabia claim that the kingdom's production has risen to slightly exceed 10 million barrels per day, hinting at its intentions for the next cartel meeting. This move represents an increase of nearly 200,000 barrels compared to the previous pumping data.
Decisions without pressure
«Producers should discuss wisely and with the facts in hand without being influenced by pressures and conflicting calls to release more oil into the market, something that could lead to undesirable results,» Alluaibi has argued.
The minister has echoed, in this way, the information published last week that reported that the United States was unofficially pressuring several countries to increase crude production.
Although it was not confirmed by any producing country, that information gained weight a few days later when India's Oil Minister stated that Saudi Arabia had informed him that it was «reviewing» its oil production cuts.
Alluaibi has argued that countries «should not exaggerate the market's need for more oil supply for now, something that could cause great harm to global markets.» For the Iraqi minister, this would lead to a «significant» drop in crude prices, something that would be «unacceptable» for Iraq.
No to unilateralism
Furthermore, the country has issued a warning to its OPEC partners rejecting «unilateral decisions by some oil producers without consulting the rest of the members» participating in the oil pact.
OPEC is immersed in a program of oil production cuts (1.8 million barrels less per day), along with Russia and other producing countries, which began in January 2017 and is scheduled to end in December 2018. With crude at its highest since 2014, producers are now debating whether to slightly increase production to benefit from the higher barrel price.
The next meeting of the oil cut monitoring committee will be on June 21. One day later, on the 22nd, the 174th ordinary meeting of OPEC will take place in Vienna.
Countries that cannot increase production
Countries that do not have the capacity to pump more ‘black gold’ will advocate for the extension of cuts so that the price of oil rises as much as possible. If crude reaches much higher prices, these countries could obtain enough dollars to invest in their industries and increase production in the medium term.
While Russia and Saudi Arabia could argue that addressing customer concerns about the sharp price increase is good for everyone in the long term, these two countries are among a select group of producers with the capacity to increase production.
For members who cannot do so, the short-term boost gained from the price increase is more important than the long-term effects of relaxing the agreement. From the perspective of Iran, Venezuela, Nigeria, Libya, Algeria, and Angola, it is rational to oppose the increase in production; what has been somewhat unexpected is Iraq's announcement, which could pump more crude but prefers to maintain the cuts.
Colombian Association of Oil and Gas