The Organization of Petroleum Exporting Countries (OPEC) has adjusted their oil price expectations in 2015 to match the downwards trends that continues through 2015. The organization estimates now that oil prices should be at about $60 per gallon by the end of 2015.
According to a report done by Firstpost, this shows that OPEC is ready to accept crude oil prices which is way cheaper than in the recent past, if only to maintain its dominance over global oil trade. Members of the association believe that cheaper oil prices might be a solution to boost oil output in wake of more expensive alternatives such US shale; and will also work towards lowering demand for the latter.
This once again reinforces OPEC policy of being extremely defensive with their market share, ignoring other solutions such as limiting production in a quest for higher oil prices. On Monday, international oil prices fell at their lowest since 2009, with an average of $42 per barrel.
The organization is also confident that China’s current financial troubles are just a temporary setback and that, once solved, the greatest energy importer in the world will bring a price rebound with it.
“Oil is bottoming… and the deeper it goes the more the rebound will be quicker and the supply reaction will be even bigger, and prices may dip again to slightly below $45 before slowly recovering to around $60 by December when OPEC meets next” said one OPEC source.
The idea of jostling around its market share rather than manipulating prices is not new for the organization, as this has basically been its policy for the better of the last decade – it never sought to bring oil prices at a specific figure, but just to eventually influence their rise or fall, or just to keep oil afloat ahead of other energy alternatives.
However, not all of its members are content with this policy. Reports earlier this week suggested that Venezuela was seeking an emergency OPEC meeting to discuss strategies about overturning the collapse in prices, which has hit the South American country quite hard. Unlike the Gulf countries, which have enough liquidity gathered so as not be in any real danger of a financial crisis, the South American country is currently in dire straits because of its over-reliability on oil exports, with the economy crumbling and popular discontent with president Nicolas Maduro’s tenure on the rise.
But Venezuelan concerns are unlikely to be addressed until the next scheduled official meeting of the organization in December. In any case, it finds itself an unlikely ally in Russia – probably the most dependent non-OPEC country in the world of oil exports.
Image Source: Wall Street Journal