OPEC production freeze fails to boost crude oil prices 

The decision by the Organisation of the Petroleum Exporting Countries (OPEC) to embark on production freeze last year, offered hope for higher crude oil prices in 2017.

But the fall in crude oil prices to less than $50 a barrel having hit $60 a barrel at the onset of production cut, has dimmed the hope of producers getting better oil revenue this year.

OPEC agreed to cut production in November last year partly because it was incapable of sustaining output at 2016 levels.

OPEC and 11 other producers including Russia had agreed in December to reduce their combined output by almost 1.8 million barrels per day (bpd) in the first half of this year, to support prices and curb oversupply.

But crude oil prices have steadily fallen below $50 a barrel in the last two weeks partly due to uncertainty over whether an Opec-led production cut will be extended beyond June in an effort to counter a glut of crude.

For example, West Texas Intermediate (WTI) dropped to $48.23 per barrel during on Tuesday morning while Brent managed to climb to $51.30 a barrel.

Chairman of OPEC’s Joint Ministerial Monitoring Committee (JMMC), Issam A. Almarzooq, in a speech posted on OPEC website, attributed the current low oil prices being experienced in the last three weeks to the United States’ high inventory and the inability of some countries to conform to the new production policy.

He said some other countries have not been able to meet their production adjustments due to temporary difficulties.

But, OPEC Secretary General, Mohammed Barkindo, said worst days are already over for Nigeria as the country has been able to scale through difficult energy circle.

He said: “I want to emphasize here that some producers have over-performed.  They certainly deserve recognition for their efforts.  So I would like to expressly offer my appreciation to both Angola and Saudi Arabia for conforming beyond expectation.  I hope their achievements will motivate other participants to reach their own goals – and perhaps to even go further.

Almarzooq believed that there is still need to put in more efforts to sustain the prices at a reasonable level. “I would like to candidly say that, in general, more has to be done.  We need to see conformity across the board.  We assured ourselves – and the world – that we would reach our adjustment to 100 per cent conformity.

“Our voluntary adjustment is and will remain 100 per cent, and although this should be seen as a collective effort, individual countries also need to take their conformity very seriously.  If we reach our common objective, we could see balance returning to the market by the third quarter of 2017.  If not, this date may be pushed further out.”

He expressed concern over the current low crude oil prices saying, “as we have observed over the past couple of weeks, stocks remain stubbornly high, particularly in the U.S.