OPEC must not rush into a quick-fix

As the Organization of the Petroleum Exporting Countries (OPEC) braces to meet in Algiers on September 28, there are pressures from different corners on the group to take a decision on oil supply. However, the OPEC has to take a very cautious approach. Any hasty step or quick fix to limit the production to raise the crude price may not provide a lasting solution. The OPEC has to look at a sustainable method to stabilize oil markets. To find such a sustainable way, it will be imperative for the group to meet more often and weigh various proposals and options before it.
The run-up meetings to the Algiers gathering have shown that the discussions have been bogged down by too much expectation for a deal. Excessive hope will make the consensus more elusive. Let Algiers be a starting platform for consultations. Through these consultations, an agreement will take shape over a
period of time.
The oil market is currently facing a lot of daunting challenges. And these challenges can be surmounted through sustained effort, not through a knee-jerk
reaction. A decision that is based on a long-term remedy will help to tide over the tough problems.
Recently, the International Energy Agency (IEA) warned that a global oil glut will linger until mid-2017 as demand growth has decreased and supply was peaking. The IEA pointed out that China and India had been major drivers
recently of demand growth, but the deamnd is slowing now. There is also slowdown in the US and economies of the developing countries, the report stated. The supply-demand dynamic is a cause for concern. Rebalancing the market is important, but it has to be done in a very prudent manner. All the stakeholders have to sit down and devise a policy that can tackle market volatility.
Apart from IEA’s alarming statistics, the OPEC should also heed to the threat posed by petroleum firms’ announcement to cut investment budgets. Oil company Petrobras has declared that it will slash investments by 25% over the next five years. This will affect the industry severely in the long run and leave the
future supplies insecure. Cutting investments today would lead to high oil price tomorrow.
At a meeting on Friday, Saudi Arabia for the first time in two years offered to pump less if Iran limits oil output at current production level of 3.6 million barrels a day. The Algiers meeting comes against such a positive backdrop. Things have to be taken ahead from this point. The consultations at Algiers should focus on deliberations to put up a joint OPEC fight and bring about integration in the group. A sense of solidarity has to dawn upon its members. This feeling of solidarity can only bring about a sustainable and long-term solution.
The OPEC needs to decide on a coordinated plan to sort out the oil supply dilemma. A cohesive strategy that takes into consideration the situation in all member as well as non-member countries will get a thumbs-up. OPEC should target stability in the oil market, by taking concrete measures with an eye on the future. It has to take help from all stakeholders. Cooperation will the key to a
solution that lasts for a long time.