OPEC meeting filled with ambiguity
OPEC nations met on Friday and agreed to increase crude oil production. Head of OPEC Suhail Mohammed Faraj Al Mazrouei announced that nations would begin producing at the maximum output as allowed by the 2016 agreement.
Further, in 2016, OPEC nations voted to limit production to a certain amount so that they could keep prices at a decent level and limit an oversupply of oil. But after countries like Venezuela had oil outages, supply fell sharply and, consequently, prices rose dramatically. But after Friday, production is forecasted to increase by at least 600,000 barrels a day, according to Nigerian Energy Minister Emmanuel Kachikwu.
However, there is strong ambiguity in terms of who will actually supply the additional barrels of oil. Although Russia and Saudia Arabia, two major oil producers, will expectedly generate more, no specific countries have obligations to increase production.
In fact, even after the meeting, MRL Corporation CEO Cornelia Meyer reported that the second half of 2018 could face a daily shortage of two million barrels. President Trump, who frequently criticizes OPEC, tweeted this on Friday:
“Hope OPEC will increase output substantially. Need to keep prices down!”
Oil prices have risen over 20% this year, and many countries’ economies are hurting because of it. OPEC reports that an increase will likely take time to help adjust economies across the globe, especially if there is still a daily shortage of nearly two million barrels.
Although this meeting showed significant progress for OPEC, they may have to more specifically allocate production targets to meet their daily goal.
Featured image via Flickr/alex.ch