Oil prices kept on its progress this week, where the price of Brent crude reached to $ 48.35 a barrel, Marking the highest level in five weeks, and of course there was a clear role for the remarks by the main producers about the possibility of making a decision for the stability of oil prices of the Organization of Petroleum Exporting Countries meeting (OPEC) and Russia in Algeria next month.
In practice, this progress in price is not considered as an indicator on the survival of its rise , but we may see a clear fluctuate during the day, and on the back of statements issued by officials of the OPEC producing countries or usually the analysts in key markets.
Talking which is running in the circles now is Saudi –Russian arrangements to re-strengthen the market during the Energy Forum meeting in Algeria in the period between 26 – 28 of the next September , which is what might result in a convergence in case the devoid of the terms of the participation of all producers in the organization, and here we mean Iran.
Recently , the Minister of Energy and Industry, Saudi Arabia and Mineral Resources Khaled Al-Faleh said that Saudi Arabia is working to restore the balance between supply and demand to support oil prices, and that the Kingdom’s production of crude is witnessing high demand in most parts of the world due to the decline in oil supply from outside OPEC in addition to the stop of supply in the light of the increased demand .
The Reuters news agency quoted of a source as saying that Saudi Arabia ,s production could reach in the current August about 10.9 million barrels a day, while Russia produces 10.85 million barrels a day. The Saudi oil produced in July at a rate of 10.67 million barrels per day, the highest level in history .
The Russian Energy Minister Alexander Novak, expressed about his hope that the crude producers to take action to achieve price stability, and said that his country was “conducting consultations with Saudi and other producers to stabilize the market.”
According to a statement of the Russian Ministry of Energy, it is expected to hold a regular meeting between Russia and OPEC, or the so-called «energy dialogue» in October (October) in Vienna.
And apparently the Kingdom strives to restore balance to the market in the coming period, but some of the obstacles encountered in these efforts and in particular Russia, which is not known for its commitment over the past years, to any agreement or cooperation, which is dominated by volatility and a retreat from positions , Add to that the Iranian side also, they may not have lived up to any initiative led by Saudi Arabia, as it did in the Doha agreement, which failed to fix the production ceiling, citing the restoration of market share, which was before the international sanctions, but this justification is no longer accepted that it has exceeded its market share in the last period.
Last week, sources were quoted that the Iranian Oil Minister Zanganeh Begin told parliament that his country wants to increase production to 4.6 million barrels per day within five years, which is much higher than the 3.6 million barrels per day currently and between 3.8 million and four million barrels per day before the sanctions.
The other side of this equation is : do still shale oil hinder conventional oil path ?In fact, this question may suggested in the case that the global oil prices have reached to worthwhile level of operations of shale oil extraction , and at the same regard, the International Energy Agency reported that the shale oil in the United States needs to get the price of crude to $ 60 a barrel, in order to record a significant increase in Activity producers. Industry experts have confirmed that the large debt incurred by the Governor of American banks make it difficult for shale oil companies to obtain new financing, if the prices have not risen to the high levels above $ 60 a barrel.
It is noteworthy here that the aim is to freeze the production ceiling to reduce oil supply which is above the market need, and of course this supply produced a decline in world prices since the summer of 2014 until reached its lowest level in early 2016.
Finally , it must be admitted that the oil markets are still reeling of foggy state and uncertainty, noting that the producers are divided among them today , and a political factor plays a major role in the oil markets and impact on prices, also can not overlook the existing market factors on supply and demand, Add to this , the economic growth which is witnessing a significant slowdown, so it may require the cooperation of all producers to re-equilibrium state which is lost about two years ago, otherwise the oil markets are in front of big challenges that might burden the rentier states, which are suffering under pressure of weak oil prices, and perhaps the best in this case to wait for the outcome of the energy Forum meeting in Algeria as well as the «energy dialogue» in the next October in Vienna between Russia and OPEC.
Amer Al-Omran
Translated by : Mudhaffar Alkusairi
Rawabet Center for Research and Strategic Studies