OPEC: road map towards rebalancing

OPEC: road map towards rebalancing

Giuseppe Didonna
In an informal meeting in Istanbul, during the WEC, between some of the leading member countries of the Organization of Petroleum Exporting Countries, a need emerged, driven primarily by Moscow, to also involve Washington in the agreements for reviewing crude oil production levels

Russia would like OPEC to send clear guidelines to the U.S., which, as recalled Russian Energy Minister Alexander Novak, is the “third largest oil producer outside of OPEC”. This was the most significant aspect of the informal meeting between the Energy Ministers of Qatar, the United Arab Emirates, Algeria, Venezuela and Russia with OPEC Secretary General Mohammed Barkindo in Istanbul, with the aim of giving a new balance to the oil market. The meeting was held on the sidelines of the third day of events of the World Energy Council, with the aim of accurately defining the parameters resulting from the agreement reached in Algiers last month, the first since 2008, a target that, however, requires the collaboration of non-OPEC producing countries. Particularly important, as confirmed by the secretary of the organization, is the definition of a road map that establishes a certain path to follow to rebalance the oil market.

Barkindo: a very positive meeting

Although this was an informal meeting, from which no official decisions were expected, the presence of Russian Minister Novak made it a particularly important occasion. The hope of “indications” by OPEC regarding Washington is an openness to collaboration, but only if the major non-OPEC producers are put on an even keel. Barkindo appeared, however, optimistic, emphasizing that the meeting was defined “very positive”; the parties are due to meet at the end of the month, for a technical meeting in a special commission, in order to find the fastest and most sustainable solutions to give stability to a market that in recent years has proven to waver far too often. The road map leads to maximum inclusiveness and increased coordination and collaboration between OPEC and non-OPEC countries, with the latter which may, through a process of rapprochement, perhaps benefit from the guarantees offered by the organization.

More flexible parameters for Iran, Libya and Algeria

The presence of Alexander Novak made the meeting particularly desired. The Russian minister, asked about the possibility of his country reducing its demands, declared that figures and numbers had not been discussed, but rather concrete strategies and actions to be implemented in the future. For production levels, is will be necessary to await the decision of the organization. As regards the difficulties shown by major countries in the oil industry, such as Iran, Libya and Algeria, in the meeting in Algiers, the organization had already agreed to meet with these countries, applying flexible parameters and different conditions. The secretary of OPEC then declared he could not guarantee the participation of the United States in the meetings, however the hope is to be able to include the U.S. in the increasingly active dialogue and in the growing coordination that is hoped will be established between member and non-member countries. According to Barkindo, even the “Stock overhang” system, that does not guarantee fair prices and ends up blocking the flow of investments and keeping the market on sustainable levels, is to be reviewed. Finally, Russian Minister Novak wanted to reiterate that OPEC is working to get all parties together, including producers and importers, members and non-members, in an attempt to create a shared process.