OPEC integration must for a sustainable deal

The run-up to OPEC oil ministers’ meeting in Vienna on November 30 has been patchy. Last week’s talks of OPEC officials to resolve the issue of freezing production fell flat. On Saturday, Saudi Arabia abandoned the planned meeting with non-OPEC nations due to lack of agreement on how to share the burden of supply cuts.
Despite the hiccups it has encountered on its way, a lot of hope is being pinned on the November 30 meeting. It holds enormous significance because if the OPEC is able to strike a consensus on output cut in Vienna, it would be the first time that they would do so since the 2008 financial chaos.
On Monday, the OPEC officials are supposed to meet non-members. The bloc is seeking external support because their role in bringing about stability to crude production is vital. Reportedly, OPEC has asked Russia for 500,000 barrels a day of non-OPEC cuts. Moscow is awaiting an internal agreement from OPEC to slash supply till it decides on its contribution.
Therefore, it is crucial that the group removes its internal roadblocks. Saudi Arabia has to take a pragmatic and cautious approach. The stance of Iran and Iraq will also play a key part in any deal that takes shape. All OPEC countries should make an arrangement which is collectively beneficial and acceptable.
In November 2001, OPEC had agreed to reduce supply by 1.5 million barrels a day, only if non-OPEC producers contributed another 500,000 barrels of cuts. This was through consensus. The OPEC has to strike a similar chord of solidarity this time too. The members have to join hands and keep the common future in perspective while taking a decision on sharing cuts. All members should share the burden of cuts equitably and transparently. This will add credibility to the deal and help it to be implemented effectively.
How much a country should reduce production and from what level? These issues need to be worked out amicably. Only in a climate of cooperation will long-term solutions be reached.
The International Energy Agency has warned that 2017 could be the fourth consecutive year when there would be supply glut and demand fall short, sending prices to plummet. The supply-demand dynamic is a cause for concern. It has become essential for the OPEC to arrive at a lasting agreement on its output, which will help the markets to stabilize. An oil production cut will help the oil price to rise to $55-60 a barrel, while reducing the volatility in global economy.
Venezuela’s President Nicolas Maduro has said that the OPEC pact reached in Vienna will be a “total success”. His oil minister has already called it “a historic agreement”. The OPEC can seal a deal through coordination and find out a sustainable method to stabilize the oil markets. The challenge is daunting, but OPEC can succeed if it faces it jointly. A united OPEC fight is the real remedy to the problem arising out of the oil glut. Integrating members and bringing them on a single platform will pave the way for a sustainable accord.
But OPEC shouldn’t stop at the deal. After striking a long-term agreement, the group must shift its focus on the investment budgets of oil companies, which are being cut. Cutting investments would lead to a bigger problem. There has to be a cohesive OPEC strategy through which the investments are scaled up.