All eyes on OPEC meeting

TEHRAN Nov 15 (Shana)–OPEC’s meeting is approaching when twelve members of the organization are going to attend 166th ministerial meeting in Vienna on 27th November.

The meeting is taking place at a time when the members are far from united about how to respond to falling oil prices, a rift that, some observers believe, has deepened due to lack of unity among the members as well as OPEC’s inaction.

Oil prices have fallen from 115 dollars per barrel in June to about 80 dollars now. Some believe OPEC is very divided about how to respond and even some go further stating others, outside of OPEC, are deciding on behalf of the organization.

Current downward trend of falling oil prices started from the day when Saudi Arabia decided to reduce its official selling price (OSP) to its customers in Asia Market and Iraq and Iraq followed suit.

Although these things could be evaluated as technical and routine in the oil market but it provided an opportunity for some to blame OPEC members for sliding prices.  Even some accused Iran along with Saudi Arabia, or just Saudi Arabia, as the power behind falling oil prices.

Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt has said that OPEC has recently focused its efforts on market share instead of defending prices.

Jeffrey Currie, Goldman Sachs’s global commodities research head, has said that OPEC has distanced from its traditional role that used to balance the market through cutting of raising production and, according to IEA, OPEC has ceased to perform the role it played in 1980s.

Now on the verge of holding OPEC meeting and at a time when debates are escalating, a number of OPEC members believe in cutting production and some others believe in maintaining current ceiling output. But what is expected from OPEC is that the body proves that it is not just a symbolic body but is able to play a constructive role in the market through consensus.

Mike Vintner, head of oil market research in New York has called current situation in the oil market unprecedented asking the question whether OPEC has decided to abandon its role as a balancing force in the market and allow the market forces to decide on the surplus.

Despite these circumstances, evidence shows that OPEC members have been able to manage tougher crises in the past including oil shocks and restore equilibrium in the market for the benefit of producers and consumers.

By SHANA

 

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