The Organization of Petroleum Exporting Countries (OPEC) faces many challenges due to the instability of the global oil market, and instability comes as a result of trade disputes between China and the United States and the United States and China are the largest consumers of oil in the world because they are the most productive countries in the world for all industries.
The impact of trade disputes between them is very large, as the emerging dispute between them made fear spread between manufacturers in both countries, which made the demand for oil less and the instability of the oil market, and OPEC is trying to find solutions to that crisis, which affects the economy.
The economy of most member countries is based on the export of crude oil to industrialized countries such as the United States of America and China, the two largest countries in terms of import of oil and in terms of consumption.
Challenges facing OPEC
The Organization of Petroleum Exporting Countries (OPEC) faces several challenges over its ability to balance the oil market with lower prices despite compliance with a production cut deal and US sanctions on Iran.
Those interested in oil markets are awaiting the recommendations issued by the ministerial committee meeting to follow up the OPEC production reduction agreement, which is held in the UAE capital (Abu Dhabi). The committee is composed of Kuwait, Oman, Russia, Venezuela and Algeria. The trends of the regular meetings of the Organization of Petroleum Exporting Countries.
How is balance achieved?
UAE Minister of Energy Suhail Al Mazrouei said about these challenges, saying that “the crude producing countries will do all that is important to achieve balance in the market in light of lower prices, falling demand, and escalating trade disputes.
Al Mazrouei said in a press statement that the oil market during the current time is not affected by the process of supply and demand significantly, but more affected by the geopolitical changes and trade tensions.
He continued by saying that the biggest challenge facing the market at the moment is not to determine the price of oil, especially since there is no price, but the biggest challenge is the availability of necessary precautions, and not to save oil supply in the market.
Al Mazrouei believes that the decision to reduce production again is not the best decision to raise prices because of the presence of other factors affecting the determination of prices.
As trade tensions between the United States and China return, crude oil prices around the world have fallen, while some stability and rise have recovered as news emerges that an agreement between the two countries may be approaching.
Earlier this month, a new US tariff package of 15 percent on China’s exports to the United States worth $ 115 billion came into effect, while another 15 percent tariff package will come into effect on Chinese imports worth $ 160 billion from today. .
Also, a Chinese decision to impose an additional 5 and 10 percent tariffs and duties on goods coming from the United States worth 75 billion dollars, including 5 percent on US exports of crude oil coming to China, which will lead to a decline in the strength of its competition for crude oil coming from other markets.
Saudi’s duty to balance the oil market
The new Saudi Energy Minister Prince Abdul Aziz bin Salman, said that Saudi Arabia is committed to the agreement (OPEC Plus), which aims to reach a balance in the global oil market.
In his remarks, Saudi Minister Bin Salman also stressed his commitment to the OPEC agreement to reach the global balance in the oil markets, during his participation in the World Energy Summit organized by the UAE in its capital Abu Dhabi.
The Saudi minister stressed that “Riyadh is fully committed to achieving the objectives (OPEC Plus)” to restore stability to global oil markets.
For its part, the Iraqi Oil Ministry, in a statement on this subject, it is committed to the agreement on the reduction of production, and will begin to reduce production directly in October, at the same time will be the maintenance of refineries in addition to the reduction of domestic consumption.
Effects of the global political situation on the oil market
Some Arab analysts of the oil market that the markets are waiting for the meeting of the ministerial committee, during a time of high political tensions between Iran and the United States, as well as reduce production of oil, but prices did not increase as imposed.
What is happening now is a trade and economic war between China and the United States “in the struggle for survival of the strongest.”
The United States is currently the largest consumer of crude oil in the world with a daily consumption of about 17.5 million barrels, while China is second in terms of consumption, where China consumes about 12.5 million barrels per day.
China is the largest importer of crude oil in the world, importing about 10 million barrels per day, while the United States is the second largest importers of crude oil, which imports daily about 9 million barrels.
Any trade tension, as it currently exists, raises concerns in factories and production centers in the two countries because of the potential for poor competitiveness of goods produced in the United States and China with foreign counterparts.
This concern leads to the use of the option to reduce production, leading to weak demand for crude oil by the factories of China and the United States, the first and second largest consumers and importers of crude oil in the world.
The conflict between the United States and China will put more pressure on oil markets in the coming period, and oil prices fell below the levels expected at $ 60 a barrel.
It is expected that the future of oil prices will be determined in the coming period at the next meeting of the Organization, and it is likely that the volume of production will not change from the current rates, or the Organization will be bolder and reduce production again to raise oil prices slightly to reach the desired rates.
Difficulty making a decision
It is known that the Committee does not have as much power to make executive decisions, but to monitor and make recommendations to the Organization. Under the current situation, the Committee will have difficulty in reaching a critical decision, as markets change due to trade tensions between the United States and China, and sanctions against Iran. from the United States.
Washington imposed a package of sanctions on Tehran in November last year, which prevented the oil industry from producing, transporting and exporting, or obtain revenues from the sale of oil if exported away from official channels.
In July, Iran’s crude oil production fell to its lowest level since the 1980s due to US sanctions. Last month, Iran’s oil production reached 2.213 million barrels per day. In June, Iran’s oil production was approximately 2.26 million barrels per day. .
It is expected to remain focused on the US-China negotiations, which helped to recover the oil market in the past few days.
Pessimistic outlook for oil demand growth
In its latest OPEC report for August, the Organization of the Petroleum Exporting Countries (OPEC) announced negative forecasts for crude oil for the remainder of the year, due to Britain’s secession from the European Union and the US-China trade war.
OPEC production fell in July 2019 for the eighth consecutive month, confirming the organization’s continued efforts to support oil prices.Opic has cut production by 40 thousand barrels per day due to lower expectations for oil demand growth in 2019, falling from 1.10 The group expects to record a small surplus next year.
The OPEC Plus consortium, which includes both key OPEC members and independent producers led by Russia on 3 July, agreed to extend the agreement on reducing the production of crude oil by 1.2 million barrels per day until the end of March 2020, over the next nine months.
Earlier this year, the Alliance began implementing an agreement to cut crude oil production by 1.2 million barrels per day for six months.
OPEC has lowered its forecast for oil demand next year
Suhail bin Mohammed Al Mazrouei, UAE Minister of Energy and Industry, said at the beginning of the meeting that the recommendations that will be issued at the meeting will help to achieve balance in the global oil market.
“The strategic objective of Saudi oil policy is always to promote stability in the world oil market,” said Saudi Energy Minister Prince Abdul Aziz bin Salman, adding that the main pillar of the kingdom’s oil policy will remain unchanged.
The minister stressed the importance of achieving stability in the market and maintaining a high degree of cohesion within the Organization of the “OPEC”, stressing that all countries of the Organization must abide by its obligations regardless of size.
He added that the joint ministerial committee will follow up during the meeting, the levels of production approved during the meeting last August and with the end of the meeting will announce what has been reached in determining the best ways in the face of market developments that will occur in the future.
Alexander Novak, Minister of Energy of the Russian Federation, said that his country will continue to work with all member states and non-members of the Organization of Petroleum Exporting Countries in order to face the developments of the global market and adapt to them and take the best ways to overcome the emergency challenges.
Mohammed Barkindo, Secretary General of the Organization of Petroleum Exporting Countries (OPEC), for his part, stressed the commitment of the Organization to take the appropriate decisions to ensure the balance and stability of the global oil market.
Participants in the meeting of the Joint Ministerial Committee “OPEC Plus” held in the United Arab Emirates and its capital Abu Dhabi in conjunction with the twenty-fourth World Energy Conference to work together and join forces to meet the future challenges and emergency developments of the oil market.
At the beginning of the meeting, UAE Energy Minister Suhail Al Mazrouei stressed the importance of the recommendations that will be issued during the meeting that would help to achieve balance in the global oil market.
The Saudi Minister of Energy pointed to the importance of achieving stability in the oil market and maintaining a high degree of cohesion within the Organization of Petroleum Exporting Countries. He pointed out that the operating model of the Saudi oil sector is comprehensive, and this is the most important regardless of the size of the sector. Fulfills its obligations regardless of the size of these obligations.
He added that the joint ministerial committee will review during its meeting the agreed levels of production volume last August, and will be announced at the meeting to determine the best ways in the face of developments in the oil market in the future.
Iraqi Oil Minister and Deputy Prime Minister for Energy Thamer Ghadhban said that there are many challenges facing global oil markets, including the instability of oil production in Venezuela, Libya and Nigeria, as well as geopolitical challenges due to the political situation and tensions in the region,
In a statement to the Ministry of Oil, Thamer Ghadhban, that there are technical challenges such as maximizing the production of the United States of America’s oil, as well as increasing the global oil stock in consuming countries;
The minister pointed out that the 14th meeting of the ministerial committee for production control, which took place in the city of Jeddah, Saudi Arabia, the importance of the commitment of member states in the implementation of the decision to reduce oil production in order to withdraw oil surplus from world markets, and the task of analytical and technical teams in the ministerial committee to monitor the market. To the next ministerial meeting in Vienna.
This comes in order to formulate a new agreement aimed at supporting oil prices and stabilizing the global oil markets.
The ministry said that the minister listened to statements, reports and schedules of technical committees charged with analyzing and monitoring global markets, the influences, conditions and challenges they face, and reports on the commitment of member states to the agreement to reduce production.
Ghadhban stressed the keenness of all oil producers from within the Organization of Petroleum Exporting Countries (OPEC) and its allies from outside to reach the required balance in the global oil markets.
The global oil markets have taken the lion’s share of the damage caused by trade disputes between the United States and China, where the demand for oil has decreased significantly since the beginning of the conflicts and the decline in demand led to a significant increase in the market supply and the presence of surplus oil in importing countries, which reduced the price.
This has led to instability in the oil market, and OPEC holds regular meetings in order to find a solution to market instability by reducing the production of member states and non-member countries participating in these meetings such as Russia, Russia is the second largest exporter behind Saudi Arabia. Recursion that tops the list of exporters in the world.