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Page added on November 21, 2016
Iran Agrees To Join In Upcoming OPEC Production Cut
With OPEC’s Nov. 30 meeting in Vienna just days away, the oil minister of Iran, a member state once reluctant to help the cartel gouge gas prices, announced his readiness to join in and strengthen production cuts.
“It is highly probable that oil and energy ministers of the member countries of Organization of Petroleum Exporting Countries will reach an agreement in the Nov. 30 meeting,” Iranian Oil Minister Bijan Zangeneh said Saturday after meeting with OPEC’s secretary general in Tehran, the oil industry news site Shana reported. He added that “even Western countries expect higher prices in the market that the current levels,” and that the cartel would target a range of $55 to $60 per barrel, up from less than $50 today.
Zangeneh’s declaration contrasted with his stalemate last summer, when he blocked the cartel from reaching an agreement at a June 2 meeting in the Austrian capital by refusing to support a Saudi Arabian proposal to freeze output and consequently jack up the price of oil.
The 14-member industry group, whose member nations have suffered over the past two years from the plunging price of their economies’ top commodity, announced at the end of September its plans to cut production at its upcoming Nov. 30 meeting to between 32.5 million and 33 million barrels per day. OPEC’s current output is approximately 33.26 million barrels per day.
Since the summer of 2014, oil prices have more than halved, plummeting from more than $110 per barrel to about $47. The drop has been especially painful for OPEC member states like Iraq, where oil production accounts for more than 41 percent of gross domestic product (GDP) and Saudi Arabia, where it makes up nearly 39 percent of GDP.
But while the cartel may have finally reached consensus on its price gouging plans, the effect of an output cap may be limited.
In October, the World Energy Council released a report from its 2016 summit predicting demand for energy to peak before 2030.
“It is clear that we are undergoing a grand transition, which will create a fundamentally new world for the energy industry,” said Ged Davis, the council’s Executive Chair of Scenarios, according to the report. “Historically people have talked about peak oil but now disruptive trends are leading energy experts to consider the implications of peak demand.”
The election upset of Donald Trump on Nov. 8 also stands to potentially nullify the effects of an OPEC production cut. On his campaign site, the president-elect pledges to “unleash America’s $50 trillion in untapped shale, oil and natural gas reserves” and “eliminate all barriers to responsible energy production, creating at least half a million jobs a year, $30 billion in higher wages and cheaper energy.”
6 Comments on "Iran Agrees To Join In Upcoming OPEC Production Cut"
rockman on Mon, 21st Nov 2016 3:10 pm
And again just so funny: “…and that the cartel would target a range of $55 to $60 per barrel, up from less than $50 today.”. An organization that couldn’t prevent the price of oil from falling $50+/bbl wants the world to believe it has such a fine tuned control of the dynamic that they’ll force to a $55 to $60 range.
If they can do that why not $60 to $65 per bbl? If they returned its production back to that early 2014 level the extra $10/bbl would earn it an extra $110 BILLION per year. Granted not as big as the $700 BILLION in lost revenue the last 2 years.
joe on Tue, 22nd Nov 2016 1:02 am
Opec cant do squat without Russia and even if they could price rises will cause tight oil to come on. Opec might be 45% of supply but they HAVE to pump to pay for corrupt jihadi government. Trump might open up the whole US to drilling, ok fine, but thats not gonna create demand. The steps needed to create future demand (change the age profile, rebuild the Rustbelt, increase wages, deal with legacy debt from 2007, deal with CEO pay issues) would take decades to reverse ie reverse globalisation, basically copy what China did in the last 30 years. There may be a $50trn industry there but only protectionism would get it going immediately, and that would result in economic war with China.
The ones I feel sorry for are the Asians who woke up today knowing that China is their daddy now, and that Americans need to sort out domestic problems, liberals are mad because they cant use economic policy as a tool of foreign policy anymore, conservatives will be mad because they are about to learn the limits of a world of peak child, and peak oil.
Northwest Resident on Tue, 22nd Nov 2016 1:39 am
I’m a conspiracy theorist. I believe that this whole OPEC “cutting production” propaganda event is to cover for the fact that the OPEC countries on average are rapidly reaching a point to where they won’t be able to keep up current levels of production anyway. They don’t want to come right out and say “hey guys, we’re running out of oil” — that might create the “wrong impression”. So they rig up a big subterfuge propaganda blitz, generate a lot of publicity. Then when they finally do come around to agreeing on something and actually “cutting” production, there will be a damn good “reason” in place as to why there isn’t enough oil to go around. Those damn OPEC guys!
Or not…
makati1 on Tue, 22nd Nov 2016 1:56 am
joe, I bet the Asians are not at all troubled by the Chinese Daddy. Maybe you read too much imperial propaganda? If you mean Japan, look again. If you mean South Korea, look again. As for the ASEAN countries, they know who butters their bread and it ain’t the U$. Ditto for The south Asian countries who have borders with China. Australia is climbing aboard the Chinese trade train. China is the trade with a future. The US and most of Europe is dying.
“Chile, Peru to join China-led trade partnership ”
“Xi bats for ‘inclusive’ Asia Pacific free trade area ”
“China, Russia to Push for Free-Trade Area in Asia-Pacific”
“With Trump coming to power, Japan could pivot away from U.S.-centric policy”
“With TPP Dead, China Officially Launches Its Own Pacific Free-Trade Deal”
“Latin American economies look to China for free trade options”
And on and on…
Davy on Tue, 22nd Nov 2016 6:29 am
It is the marginal producers that will have an impact of limiting price. We can also consider renewables increasingly as a marginal producer. The impact of gas as it integrates into traditional oil based markets is another marginal influence. Russia and OPEC must produce oil for survival especially OPEC countries. Russia is more diversified and a larger economy and consequently has more ability of maneuver. OPEC countries are trapped in the oil curse.
It is to everyone’s advantage including the consumer to locate a beneficial zone of price and supply. We are at the point in time where no one will prosper from oil. We are in broad based decline including demand. Oil producing economies have become too dependent on oil and increasingly have raised their breakeven point. The costs of production are no longer the only metric. Saudi’s may have low cost but they have high social and economic demands. The best thing that can happen for everyone is a price higher than it is today but low enough that further demand destruction is not accelerated. Sounds like a no-brainer but it is more complicated than that. This is a moving target because of financial decline and depletion. Cooperation does not seem to be possible in our global system at the level needed to maintain a zone.
In my opinion we need to be around $60 currently with that rice gradually moving down with a declining global system. Ideally we would involve more parties to oil price stabilization like consumer nations. Globalism is about a balance of competitive cooperation. If you get that out of balance globalism will decay. Since every one of us live in the dangerous existential situation of a delocalized local absolutely dependent on a healthy global system it is profoundly important we get this right. The problem is market based capitalism is about profit and exploitation of weakness for yield. It is about nations in deadly completion geopolitically. That is not balance.
In the end it is about all of us and our survival. Until the status quo realizes a crisis that is dangerously close to collapse we may not find common ground. Once we get to a crisis threshold it is likely too late. The answer is luck at this point or fate. This is beyond human intervention it is self-adaptive and self-organizing. To influence self-organization we need the entire global world to be on the same page. I doubt that is possible so what will occur is something beyond a rational outcome but with a rational basis. It is riding rapids in a river. It is turbulence and there is no formula for turbulence.
2018 dậu on Wed, 22nd Nov 2017 11:18 pm
There’s definately a lot to know about this topic. I really like all of
the points you’ve made.