The Iraqi Oil Minister, Thamer al-Ghadhban, has asked OPEC’s head, Mohammed Barkindo to call an extraordinary meeting of OPEC+ to “discuss all possible ways” to reverse the oil price slide that began after Saudi Arabia announced it was going to start raising production and cutting prices. In a letter seen by Reuters, al-Ghadhban told Barkindo an extraordinary meeting could help “to avoid adverse impacts on (the) short, medium and long term.”
Iraq is among the oil-producing countries most dependent on their oil revenues, so it is natural for al-Ghadhban to be the first to voice concern after Brent slipped closer to $30 yesterday. The OPEC basket of crude grades is also trading at a little over $30.
Oil prices, already depressed by the slump in oil demand caused by the coronavirus outbreak, fell sharply after earlier this month Saudi Arabia announced it would be raising its production from below 10 million bpd to over 12 million bpd. The Kingdom’s announcement came in response to Russia’s decision to not take part in a deeper round of production cuts proposed by OPEC, aimed at stymieing the oil price slide.
This is the same tactic that Saudi Arabia used in 2014 to stifle the growth of the U.S. shale oil industry. Then, the attempt failed when prices tanked so low that Saudi Arabia too began to feel the pain. Things have not changed since then. The Kingdom is still one of the lowest-cost producers of oil in the world but to balance its budget, it needs Brent at more than $80 a barrel. If it doesn’t balance its budget, there will be no money for all the ambitious economic reform projects Riyadh was planning in a bid to reduce its dependence on oil.
Russia, meanwhile, will also be pumping more. Energy Minister Alexander Novak said at the Vienna meeting in early March that Russian producers could add between 300,000 bpd and 500,000 bpd to daily production starting next month, adding to an already sizeable global supply glut.
By Irina Slav for Oilprice.com
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