OPEC is once again playing its cards under the table as it becomes clear that the 6 months output cuts were not enough to bring back sanity to the oil and gas market. The main aim of the Vienna meeting is to deliberate on the agenda of a possible extension of oil cut deal by another 9 months up to March next year 2018. These follow reports that the oil market is now booming with stockpiles of unaccounted for crude oil.
These high stock piles are to one, the accumulation of oil stock over the years and that the United States, Libya, and Nigeria increased their oil and gas production levels. The increase in production by these countries effectively balanced oil stockpiles in the international markets making the 6 months OPEC deal ineffective. The 1.2 million barrels per day which OPEC targeted to cut was offset by the production increase from the United States and Libya.
Oil and gas tag of war
From the look of things, oil and gas production in the world market is becoming a tag of war with OPEC and Russia on one side and the United States on the other side. While OPEC and Russia is hell-bent on reducing oil stock piles in order to control prices, the United States and its business allies are busy countering the decision made by OPEC. The oil and gas cartel has emphasized that whatever decision made by the United States regarding oil production should not affect their production policy. OPEC remained optimistic that in the long run, they will be able to curb the existing oil and gas production glut in the market.
Oil and gas companies stand to reap huge profits arising from price increases later in the year should the extension period be passed. The main aim of OPEC is to champion the interest of member countries through the collective implementation of policies on oil and gas production and export. It passes resolutions to ensure that member countries benefit from their oil and gas investments. OPEC also exists to ensure a steady and reliable supply of oil and gas to consumer countries.
The extension of production output cuts agenda has opened doors to market speculators such the hedge funds. The United States is also planning to boost its oil reserves amidst expectation of a rise in oil prices. As much as OPEC meet and make decisions on oil and gas production, the fact remains that it lacks the machinery to carry out its own policies other than the good will of the member countries. This in itself is a window that some oil and gas companies can capitalize on to exceed their production limit leading to unaccountable oil and gas figures. Oil and gas companies are making a booming business
A shortage of oil and gas in the world market causes inflation. Oil and gas companies, however, stand to reap huge profits as a result of a reduction in supplies which drive prices high. OPEC and Russia must stabilize prices despite the increase in oil and gas production from the United States and its business allies. To strike a balance in this oil and gas tag of war, it is only fair for OPEC to recommend deeper oil and gas output cuts in the coming years.