U.S. Oil Boom Deepening Fault Lines Within OPEC

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A rift seems to be widening between the Organizations of the Petroleum Exporting Countries (OPEC) due to a boom in the America energy market, reports WSJ. If this continues, a hurdle will be created between African and Arab members because OPEC is the one which handles the revolution in the oil trade worldwide.

U.S. Oil Boom Deepening Fault Lines Within OPEC

The member countries of OPEC will meet in Vienna on Friday and will try to resolve the issue over the effect of increasing U.S. shale-oil production. The countries that will be most affected are demanding that the production should be brought down in order to increase the prices in case the price starts falling.

“We are heading toward some problems,” said a Persian Gulf OPEC delegate.

According to Muhammad Ali Khatibi, the Iran representative in OPEC, due to increase in North America Oil production the oversupply of 1.5 million barrel per day has been created.

As per the data of International Energy Agency, the production from U.S. and Canada will increase almost 21 percent by 2018 from the current year.

Countries to hit most/least by Oil boom:

The countries such as Algeria and Nigeria who are member countries of OPEC and produce the same grade oil like that of shale oil are the ones which will be most deeply hit from the surge in North American oil. Diezani Alison-Madueke, Oil Minister of Nigeria said that it is a great matter of concern.

Saudi Arabia, primarily, and other Gulf countries are the countries which will be least affected by this oil boom in North America. Additionally, they are capable of bringing down the production. However, there seems no sign that the countries will adopt slashing the production strategy in Friday’s meeting, according to OPEC delegates.

The reluctance from the side of Gulf countries not to slash the oil production will further lead to disagreement between the countries like Iran, Venezuela and Algeria who support cut in production and increase in prices to balance the domestic expense, and the Gulf countries headed by the Saudi Arabia who are financially strong and can wither away the decrease in prices.

Earlier case

In the past as well, OPEC has cut down on production, primarily in 2008 when more than four million barrels per day were slashed in order to overcome a decline in price during the financial crisis.

Currently, there seems to be disagreement over the size of the challenge, but even a bigger problem will be to take a collective decision, which enjoys the support of all major members of OPEC.

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