12:53 GMT +318 August 2019
Listen Live
    Oil pumps in operation at an oilfield near central Los Angeles

    Proposed February Meeting of Oil Producers Likely to Be Fruitless

    © AFP 2019 / MARK RALSTON
    Opinion
    Get short URL
    152

    Analysts say that a meeting between the Organization of the Petroleum Exporting Countries and other oil-producing states on the situation on global oil market proposed for February will likely bring no results.

    MOSCOW (Sputnik) — A meeting between the Organization of the Petroleum Exporting Countries (OPEC) and other oil-producing states on the situation on global oil market proposed for February will likely bring no results, analysts told Sputnik.

    "A new OPEC meeting may be held. Nigeria is chairing OPEC, but it is difficult to see OPEC making a decision. Neither Saudi, nor Iran, Iraq or Kuwait are in favour," Willy Olsen, an associate fellow at the Royal Institute of International Affairs in London, said.

    According to Olsen, the country that has a chance to change the oil situation is Russia.

    "If Russia was the first to reduce its production, then others like OPEC countries might follow. The US will not enter into any deals, but benefit from others reducing production through higher oil price and return of some of the US oilfields," he said.

    PURSUIT OF PROFIT

    According to Olsen, oil-producing countries consider it is more profitable to maintain slower production rather than lose money from oil sales.

    "Shutting in an oil field will cost money. Expanding production again will also cost. Shutting down production is last resort for most players. Delaying projects and reducing costs are first priorities," the expert stressed.

    He cited the US experience with shale resources.

    "We have seen clear examples in the US where it is 'easy' to put production of shale resources on hold at low oil prices. US oil production has declined. So far the reductions have not been large enough to have major influence on the price level," Olsen added.

    EFFECTS OF PRICE COLLAPSE

    Oil service companies will see the particular effects of the low oil prices, a senior resident scholar at the Arab Gulf States Institute in Washington, Karen Young, said.

    "For oil service firms, which work for both large corporates and national oil companies, they have been hit hard and we see this even in the GCC [Gulf Cooperation Council] oil exporting states. These cuts will have ripple effects in local economies," Young noted.

    According to her, the situation will eventually balance itself out.

    "There will be a balance, especially for the GCC producers (namely Saudi Arabia) when the domestic effects of low prices will outweigh the strategic benefits of weakening the competition, whether that competition is regional (Iran) or international (US shale)," Young said.

    The lack of coordination among the oil-producing states and the Saudi unconstructive position hinder the situation on the oil market from changing, she stressed.

    Related:

    Oil Prices Continue Rally, Crude Rebounds Above $34 per Barrel
    Bahrain 2016 Budget Based on Oil Price of $50 Per Barrel - Energy Minister
    Stratfor: Pain of Cheap Oil to Drive Iraqi Kurds Closer to Turkey
    Tags:
    oil prices, OPEC, Russia, United States
    Community standardsDiscussion
    Comment via FacebookComment via Sputnik