OPEC decides not to prevent falling oil prices

7. December, 2014 News No comments

On  27th November international market noted shockingly low price of Brent Crude Oil. Dropping down to approximately 72 USD per barrel –  it is the minimal price in nearly four years time and is expected to keep sinking.

The main reason of this drop was gathering of OPEC ministers a day earlier. OPEC (Organization of the Petroleum Exporting Countries) is an international economic cartel with a mission to coordinate and unify petroleum policies in order to secure a steady income to the member states. The organization is formed of 12 countries with the biggest oil producers like Saudi Arabia, Iran, Iraq, United Arab Emirates and Kuwait. On the meeting in Vienna, member countries did not reach consensus after a heating debate in regard to falling oil prices. The biggest influence hold a Persian Gulf states with Saudi Arabia’s oil minister arguing against cutting down on production to prop up oil prices as was earlier presumed. This move is an unexpected shift in strategy and might be a sign of OPEC losing leverage. Moreover, poorer countries of organization leave Vienna thoroughly dissatisfied as they were hoping for cuts to balance their budgets.

The direct consequence of the agreement is OPEC commencing a market share combat against United States shale producers. The cartel aims to undermine profitability of expensive shale extraction procedures and eliminate North American companies from business. This would naturally boost oil prices while preserving all of the OPEC shares. However many experts utterly doubt in a point of clashing with US claiming it would take many months to slow down a shale boom.

The gathering is viewed as the most important cartel meeting since financial crysis.


Sources: vox.com, reuters.com, financialtimes.com, washingtonpost.com
Photo: breakingenergy.com

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Jakub Pitera

Junior editor in YoungPetro, a second year student of Oil and Gas Engineering at Faculty of Drilling, Oil and Gas at AGH University of Science and Technology; an active member of scientific research circle centred on petroleum production. Interested in reservoir characterisation and computer modelling. Enjoys time off by playing electric guitar, cooking and bass music.

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