OPEC President Diezani Alison-Madueke indicated Monday that if crude oil prices continue to slide, it is highly likely that an emergency meeting would be convened in the next six weeks.
The remarks from the oil minister of Nigeria are a sign of increasing panic among producers about the impact of lower oil prices on their economies.
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OPEC’s next scheduled meeting in June
The price of internationally traded Brent crude oil has dropped rapidly after hitting a high of $115 a barrel in June. Prices almost hit a near-six year low of $45 a barrel last month. Though the price has recovered to around $60, Alison-Madueke indicated she was not convinced a floor had been reached.
Monday’s comments from the OPEC president come three months after the cartel’s decision to hold production at 30 million barrels a day, even as the oil price has plunged since mid-June. Such a move has been driven by Saudi Arabia and its Gulf allies, which is a sharp deviation from OPEC’s traditional strategy of adjusting production to keep prices high.
During her interview with the Financial Times, Alison-Madueke said if the price “slips any further it is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so”. She elaborated that “We’re already talking with member countries”.
She expressed hope that the oil price will stabilize at no less than $60. She said OPEC’s role needed to be reconfigured over the next two years “if we are to remain strongly relevant”, by formalizing discussions with key oil producers outside of the cartel such as Russia and the U.S., as well as global groups like the International Energy Agency and the G20.
OPEC is scheduled to meet next in June, although in times of market turmoil, the group often convenes emergency meetings. However, all 12 members have to agree to such a move. Reacting to Alison-Madueke’s latest statement, some market analysts indicated that it is highly unlikely that Saudi Arabia, OPEC’s de facto leader, will agree to such a meeting.
Light at the end of the crude oil price tunnel
The drop in crude oil price has forced energy companies all over the world to rewrite their investment plans, and caused a major slowdown in the U.S. shale oil industry. It has also thrown the fiscal balances of large oil producers such as Nigeria, Venezuela and Russia into disarray. For instance, Nigeria, which is Africa’s largest producer, depends on oil for close to 80% of government revenues.
According a The Wall Street Journal report, Saudi Aramco, Saudi Arabia’s national oil company and the richest oil firm in the world, is now pruning its expenses and pushing contractors for better deals.
In a report last week, analysts at JP Morgan Global Research expressed their belief that crude prices have finally bottomed, and the long-term direction is up.
Interestingly, Tom Randall of Bloomberg believes it’s very possible that OPEC President Diezani Alison-Madueke’s talk about an emergency meeting was simply meant to reassure unstable markets. He notes the threat of taking action removes the need for taking action.