Abu Dhabi: The Organisation of the Petroleum Exporting Countries (Opec) is likely to stick to its position of not cutting oil production in the upcoming meet in Vienna in June as oil prices continue to move upward.
From less than $50 per barrel in January, oil prices have climbed up to $65 this week.
Analysts who spoke to Gulf News at Abu Dhabi International Downstream conference said they don’t see any change in the production targets of the oil cartel.
“Opec producers will be looking at the way prices have moved since the start of the year. Our view is that we are going to be experiencing quite a lot of volatility moving around between $50 and $70 up and down throughout the course of the year. Over all it’s going to be trending upwards,” said Edward Bell, a commodity analyst at Emirates NBD speaking to Gulf News.
He said that a lot of Opec producers continue to pump in high levels of oil to make sure that they preserve their market share and not lose any ground to outside producers.
“They are not thinking about six month kind of time frame. For a lot of Opec producers they have to be looking at ten or twenty years of time. They want to make sure that they want to lock into the markets for a very long time.”
The group, which pumps in third of total world oil production met in Vienna in November last year and decided to keep the output levels unchanged at 30 million barrels per day.
The move created a downward pressure on oil prices, which have been plunging due to oversupply and decrease in demand. From a peak of $115 in June, oil prices have decreased to less than $50 in January before moving up to $65 in recent days.
The upcoming meet on June 5 comes in the backdrop of lower oil prices, changes in the Saudi regime and the possibility of Iranian oil entering the market if sanctions are lifted by Western nations over its controversial nuclear enrichment programme.
There have also been calls from member countries like Venezuela and Iran to cut production to prop up prices.
Venezuelan oil minister Asdrubal Chavez recently toured Saudi Arabia and Iran to discuss the situation.
“I don’t think it is going to have any kind of impact. Prices are going up and we expect no change in the policies of Opec,” said Bell when asked whether pressure from member countries to slash oil production will yield results.
Francisco Quintana, head of economic research at Asiya Investments said that the strategy of Opec to keep market share while posing financial distress on competitors is working.
“Last week the federal reserve published an analysis highlighting how energy firms in the states were struggling to get financing from banks on the account of lower revenues. To successfully complete this move Opec needs to go on. “
“Political changes in Saudi are unlikely to affect its oil strategy.”
