OPEC since August began rumors of a production cut to forestall the dipping prices of crude oil, due to a glut or over-supply of the commodity. The rumors starting looking like a reality when a formal meeting was scheduled and progress seemed to be made.
With non-OPEC members brought into the picture by Russian Energy Minister Alexander Novak, oil producing countries must have been rubbing their hands in glee anticipating the rise in the price of the commodity.
However, as quickly as the rumors spread, the problems started coming in. Saudi Arabia’s long standing feud with Iran as well the resurgence of Iraq as an oil producing country created big obstacles to the deal.
The introduction of non-OPEC giant, Russia, initially seen as a boost to the cause, is now also proving to be more of an headache for OPEC, Bloomberg reports. OPEC, particularly Saudi Arabia have pushed for production cuts while Russia is favoring a freeze (maintaining current levels). Initially, OPEC felt that Russia would back down if OPEC could agree specific quotas in a production cut deal. But more and more, it seems that Russia is deciding to stubbornly stick to its decision for a freeze.
“There is no difficulty for us to freeze production,” Russian President Vladimir Putin said on Sunday after a regional conference, in comments that some OPEC delegates have taken as all but ruling out cuts, Bloomberg says.
Considering that Russia is now producing the highest quantities since the breakup of the Soviet, an output freeze will not favor Saudi and other OPEC countries. Another consideration with the situation is how it impacts on other non-OPEC oil producing countries like Mexico and Venezuela, who are unwilling to invest too much into the talks considering that Saudi Arabia sank an output-freeze agreement because of the non-participation by its old foe, Iran earlier, rendering Novak’s efforts wasted. With all these considerations, the way to go for Saudi and OPEC seems less and less clearer.