Today, Algeria is hosting an informal OPEC summit. The used to say that Russia may well join the cartel during this informal summit to discuss the current situation in the global market of crude oil and work out an efficient way to change it for the better. Still, now it is reported that Russia is not going to be participating in the summit since this is a summit for OPEC member only.
Anyway, OPEC members are still trying to agree on freezing their production quotas in order to prevent the existing oversupply of crude oil to the global market from growing bigger. Experts say that if we don’t expect anything, we won’t have to get disappointed at the end of the day. This holds true for OPEC summits in general.
Masterforex-V Academy experts say that this time we don’t have any serious reasons to expect such an agreement. The thing is that OPEC members have been confronting each other for years. Now, when oil prices have been low for over 2 years, the confrontation is getting bigger and OPEC is losing its influence as an international power in the global oil market.
All of the previous attempt to agree on freezing production quotas have been in vain. Chances are, today’s summit is not going to be any different. Still, some experts say that in reality, Saudi Arabia and Russia may eventually agree to cut their oil production and Iran may well cap its production. If that’s the case, we are definitely going to see some growth in oil prices.
For those of you who don’t know, Russia and Saudi Arabia have reached all-time production highs over the recent months. At the same time, Iran returned to the international market not so long ago and is still busy recovering its oil production to the level seen before the Western sanctions. It is important to keep in mind that these 3 oil nations produce some 1/3 of total crude oil produced worldwide. This leads us to believe that if these countries had abstained from increasing their oil production, oil prices would now be rising much faster.
Will they compromise?
Can those 3 oil nations reach a compromise on oil production? This question is still unanswered.
There are various rumors surrounding it. In particular, some of them say that Russia is not going to negotiate with OPEC unit the cartel reaches an internal agreement on production cuts or at least freezes their production. At the same time, we should keep in mind that the tensions between Iran and Saudi Arabia are still strong. Despite that, all of the parties would benefit from such an agreement through higher oil prices. That’s why we shouldn’t completely exclude the possibility of reaching such an agreement.
At the same time, it is interesting to note that these days nobody seem to be predicting either strong downtrends or strong uptrends in the global market of crude oil. Nobody expects the prices to drop all the way down to 20 dollars per barrel or increase all the way up to 80 dollars per barrel.
One thing is sure, if the parties do reach such an agreement, we may well expect the prices to reverse and go up at a much higher pace. Still the probability of reaching it is still below the average.
