Solidarity and Partnership Among Oil-producing States
Al-Ittihad, UAE, April 5
This week, the OPEC+ countries took an important step to ensure fair prices for their oil exports. They agreed to reduce production by 1.66 million barrels per day until the end of 2023, in addition to their previous 2 million barrel-per-day reduction at the end of last year. This brings the total reduction to 3.66 million barrels per day, which is 3.5% of global oil production. The OPEC+ countries’ proactive step came at the right time, as oil prices dropped to $70 a barrel before rising back to $80 at the end of last week. By taking this step, OPEC+ countries are attempting to maintain oil prices at a reasonable level and support their economic conditions amid global competition marked by tension and geopolitical issues, which have serious implications for the economic and social stability of many countries. The decision to reduce production again within six months is an impressive display of solidarity among the organization’s countries. Despite some media outlets claiming otherwise, there is a strong sense of interdependence between the member states that transcends their respective national interests. This strong solidarity is not only shaping the future of global energy markets but also driving many economic trends. The recent crisis of Western banks has come to the fore, alerting the OPEC+ countries to the consequences that could arise from its recurrence. Many observers expect this will have a ripple effect, impacting overall financial and economic conditions and dragging other sectors, including oil markets and prices, into a regressive crisis. Day after day, news of an impending global recession grows stronger. This could lead to a decrease in demand for oil, creating an imbalance between supply and demand. The United States recently achieved record levels of oil production, compounding the issue, and likely resulting in further price drops. Last week, the International Monetary Fund downgraded its forecasts for global economic growth, suggesting that demand could fall even further, and prices could suffer even more. The economic landscape, particularly the highly volatile oil markets, poses serious challenges that must be addressed to safeguard the interests of oil-producing countries. International competition is fierce, so any delay in taking proactive steps could lead to significant losses. Conversely, proper preparation for expected developments can protect and increase these benefits. The recent decision has caused oil prices to rise again by 6.5%, reaching $85 a barrel. This is a recovery from the losses due to the banking crisis, as Pickering Energy Partners predicted that this decision could lift oil prices by $10 a barrel. The International Energy Agency even warned that “sudden new cuts may drive oil prices to $100 a barrel.” The countries that make up the OPEC+ group have shown a commitment to defend their interests in various circumstances, despite the pressures they have faced. It is not out of the question that the organization will have to resort to production cuts should the global economy worsen. However, they have also demonstrated a willingness to increase production should the challenges ahead be successfully navigated. The members of the group have acted intelligently and flexibly to reconcile their national interests with those of the consumer countries, thereby promoting economic stability and growth and helping to protect the global economy from suffering further crises and shocks. This role must continue to be maintained with stronger cohesion, solidarity, and harmony among the countries of the group. —Mohammed Al-Asoumi (translated by Asaf Zilberfarb)
