OPEC: ‘Not Happy’ With $50 Crude Oil, Ready To Cut More Production
The head of the Organization of Petroleum Exporting Countries (OPEC) said Thursday that the group would need crude oil prices to rise above $50 per barrel in order for exports to be economically worthwhile, and that the cartel would not hesitate to cut output even further in order to attain that goal.
“We are not happy with 40 even 50 dollars a barrel,” OPEC Secretary General Abdallah El-Badri said at the World Economic Forum in Davos, Switzerland.
OPEC has already slashed 4.2 million barrels per day from their production quota in a bid to raise oil prices, but, as of yet, it hasn’t achieved their desired effect.
After rocketing to a record high above $147 a barrel in July of last year, crude oil futures have plummeted and have been trading in the $40 range for a while.
But El-Badri says that OPEC will do all it needs to in order to prop up prices. “If we still have some downward problems, then OPEC will not hesitate to take some quantity out of the market,” he said.
The next scheduled meeting of the cartel’s members is set to take place on March 15.
Not everyone, however, believes that El-Badri is telling the entire story. The crude itself –from its extraction to delivery and refining– can, in most cases, turn a profit at the current price levels. However, at least one analyst contends, it’s the economies and social agendas of those member nations that are the main problem.
“Some of them can make plenty of money at $40-$50 but their budgets and their spendthrift social programs can’t justify those prices,” says Tom Kloza, chief oil analyst at the Oil Price Information Service.
“There’s a formula for determining break-even crude … that doesn’t take into account what countries need to get, or what they would like to get, or what their social agendas might require for some of them to stay in power,” Kloza told Consumer Energy Report.
El-Badri is adamant in his claim that all of the 12 member nations –excluding Iraq, which is exempt from any quota– are complying with their set output limits, and that the full production cut will be registered by the end of the month.
Analysts are usually skeptical in relying on the announced output cuts due to the cartel’s history of non-compliance by some of its members.
OPEC recently blamed speculators and hedge funds for the volatility of crude futures and is seeking rules which would govern and prohibit speculation.