The main challenges facing OPEC now and in the future

by **Rocky** Mon 16 Apr 2018, 8:01 am

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The main challenges facing OPEC now and in the future

by Rocky Mon 16 Apr 2018, 8:01 am

The main challenges facing OPEC now and in the future

16/4/2018 12:00 am

[rtl] Dr. Falah al - Amiri 1 - 2
Although the main factors affecting the volatility of oil prices, traditionally, are the fundamentals of the market mainly of supply and demand but to Aaijeri in isolation from other factors that affect the volatility of oil prices , such as, the fluctuation of the dollar, economic growth for some Important developments or growth of the world economy, wars, economic embargoes, geopolitics, weather and natural disasters, technological development, growth of renewable energy sources, legislative changes and OPEC's response to oil price volatility. When the fundamentals of oil markets affect oil prices negatively, For many cases , the impact in the oil markets by reducing the gap between supply and demand in order to balance the market and raise oil prices, and this is what happened when OPEC finally intervened in 2016 to halt the deterioration of oil prices , which reached the brink of collapse.
Oil prices
If we return a little to the beginning of the crisis in the second half of 2014, OPEC decided not to intervene and followed the policy of waiting and follow-up until the arrival of the state of balance of oil markets, but after two years of low prices, OPEC reached the conviction of the need to change its policy and intervene in the oil market and control the deterioration The price of oil, which reached the lowest level in February 2016 and the limit of $ 29 a barrel.
The Organization realized that it should use a policy different from that adopted in 2014, and decided to intervene for the purpose of balancing the supply and demand of oil in world markets by controlling its oil production. Therefore, the participation of non-members of the Organization of Petroleum Exporting Countries (OPEC) and the exchange of views and discussions to find common ground to balance the world oil markets on a
wider scale  .
Freeze production
The discussions among the OPEC countries to hold a conference in September 2016 in Algeria to discuss the oil markets and find the best steps to be taken to achieve balance in the oil markets, and it was agreed in principle to freeze production or reduce according to the proportion to be agreed later depending on the size The production of each member country in addition to involving non-OPEC countries within the agreement to enhance the effectiveness of the implementation of any future agreement. On Nov. 29, OPEC and Russian-led oil producers reached an agreement on the Declaration of Cooperation (DCA) between OPEC and non-Opec oil producers, under which the output of those countries was reduced by 1,600 mb / d. This announcement was a milestone in the history of OPEC as it gathered 24 oil producing countries and cooperation between them in order to understand the mechanisms of the oil markets and work on the withdrawal of surplus oil spread in warehouses scattered around the world, especially in developed countries, which rely heavily on the production of participating countries in the DCA, which began Implementation at the beginning of 2017 has continued until now. This historic agreement has been successful in its implementation by contributing to the balance between supply and demand through the withdrawal of oil stocks. This has led to balancing oil markets and raising oil prices to a level that helps OPEC countries and non-OPEC members reduce their budget deficits.
In the following lines, we will address the assessment of the DCA agreement, the benefits it has given to oil producers around the world and the producers affected, OPEC's response 15 months after DCA and the challenges OPEC will face in the future, especially alternative energy sources such as electric cars and energy And environmental developments. Assessment of the DCA Agreement It is necessary to identify the parties that benefited and those affected by the implementation of the DCA. In terms of revenue generated by oil producers, all DCA countries, other oil producing countries, independent oil producers and other countries benefited from higher revenues of hundreds of billions Of dollars contributed to the financing of government budgets and reduce the deficit and encouraged the increase in oil investments, which decreased as a result of the decline in oil prices  .

As for the impact of the Convention on production, the picture here is different. The agreement excluded some OPEC countries such as Libya, Nigeria and Iran, which benefited by increasing their production in addition to the revenues they achieved as a result of higher prices. This certainly applies to producers of non-OPEC countries Such as Norway and Britain, as well as the United States. But despite the important step taken by the DCA countries, the rest of the producers, led by rock producers in the United States, who have reorganized themselves and managed to increase their production without interruption, which led to an increase in the US market in the international market, which reached historical levels Exceeding 10.5 m / b / y.

Options for leaving the DCA Agreement There are
ongoing discussions and discussions between the OPEC and non-OPEC countries participating in the DCA on how to deal with this agreement after the end of its term to avoid any negative impact on the world oil markets and oil prices, in order to reach the best options Available to maintain the Convention.
In the short term, the first option may be the announcement at the June ministerial meeting that DCA will be abandoned by the end of 2018. In this regard, there may be concern that this may have a negative impact on oil markets and oil prices. The second option is to delay the decision to cancel the agreement and only refer to the continuation of the agreement in the assessment of oil markets in the coming period until the ministerial meeting in November 2018, the third option is to keep the situation as it is now and delay the decision in May and June ministerial in 2019.
The fourth option is to reduce the reduction of oil production agreed to in the Convention, for example, to reduce production from 1.758 m / d to 1 m / d / 750,000 m / d, or to include the production of Nigeria, Libya and Iran. This option may lead to the most positive aspects, where OPEC can avoid the negative effects on oil prices and have sufficient time to monitor and study markets, as well as follow the growth of oil production and its effects on the balance of the market, and if the adoption of these options, Iraq to make intensive efforts to reduce the amount (210,000 b / d) to support Iraq's post-conflict reconstruction efforts.  Some initiatives

For the purpose of enhancing OPEC's performance in the face of ongoing and future challenges and in response to developments and changes taking place in the world oil markets, OPEC is constantly trying to change its strategy from time to time to avoid losing its initiative in rebalancing the markets and ensuring a sustainable market share and balanced prices. OPEC now has an opportunity to sustain negotiations with producing countries, particularly those involved in the DCA agreement, to build a long-term policy and strategy to achieve the Organization's objectives and to overcome current and future challenges, particularly the problem of the growth of oil production. Where there is an important opportunity to develop the current agreement and formulate a new policy aimed at taking measures to mitigate the negative effects on the production of DCA countries and find a balance between increasing market share on the one hand and to obtain acceptable price levels.
The success of the DCA agreement to restore the gradual balance of the oil markets during the period of implementation was the result of diplomacy, intensive negotiations, excellent management and follow-up by the Ministerial Oversight Committee, which exerted outstanding efforts, which contributed to the implementation rate of
about 100%.
This has encouraged the creation of solid ground for the emergence of important initiatives. One of these initiatives is the extension of the DCA agreement to a long period, such as five years or more, or the formation of a new organization to replace OPEC, which includes independent oil producers, OPEC countries and any other producer countries. In order to produce these ideas and proposals, it is very important to initiate the preparation of in-depth studies in order to reach a sound decision.[/rtl]

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The main challenges facing OPEC now and in the future

The main challenges facing OPEC now and in the future

The main challenges facing OPEC now and in the future

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