The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, a group responsible for 40% of the world’s crude oil production, are aiming to maintain high and stable oil prices. Despite recent geopolitical events such as the death of Iran’s president and the escalating conflict in Gaza, oil prices have remained relatively stable, hovering around $82 a barrel for Brent crude, the global benchmark, since May.
One of the main challenges OPEC faces in trying to boost oil prices is the lack of adherence to output targets by its members. In March, OPEC and Russia agreed to extend production cuts, aiming for a reduction of 2.2 million barrels per day (b/d) until the end of June, on top of previously agreed cuts for 2024. However, the cartel is currently producing more than the agreed upon amount, with daily output in 2024 remaining similar to the last quarter of 2023. This discrepancy is likely to lead to tensions during OPEC’s upcoming ministerial meeting on June 2nd, where members will discuss their strategy moving forward.
Despite efforts to curb production and stabilize prices, OPEC’s struggle to maintain output targets presents a significant challenge. The organization’s failure to strictly adhere to agreed-upon cuts is contributing to the current oversupply of oil in the market, hindering efforts to boost prices.
Moving forward, OPEC and its allies will need to address the issue of overproduction and ensure that members comply with output targets to achieve their goal of keeping oil prices high and stable. The upcoming ministerial meeting on June 2nd will be a crucial opportunity for OPEC to reassess its strategy and make necessary adjustments to align production levels with desired price levels.
In conclusion, OPEC and its allies are facing challenges in their efforts to maintain high and stable oil prices, primarily due to members’ failure to adhere to output targets. The upcoming ministerial meeting on June 2nd will be a key opportunity for OPEC to address these issues and adjust their strategy to better align with their goals. By taking action to address overproduction and ensure compliance with agreed-upon cuts, OPEC can work towards achieving their objective of stable and lucrative oil prices on the global market.
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