{"id":8120,"date":"2020-04-21T09:48:55","date_gmt":"2020-04-21T09:48:55","guid":{"rendered":"http:\/\/oilnewskenya.com\/?p=8120"},"modified":"2020-04-21T09:48:55","modified_gmt":"2020-04-21T09:48:55","slug":"opec-still-has-an-important-role-to-play-in-global-oil-market","status":"publish","type":"post","link":"https:\/\/www.oilnewskenya.com\/index.php\/opec-still-has-an-important-role-to-play-in-global-oil-market\/","title":{"rendered":"OPEC still has an important role to play in Global Oil Market"},"content":{"rendered":"

By Sebastian Wagner<\/strong><\/p>\n

Scan Western news about OPEC from the last few years, and a common observation tends to appear: OPEC had a huge influence on the global oil market back in the day. Now, in the shale oil era, not so much.<\/p>\n

I would argue that OPEC can safely state that reports of its death\u2014or dwindling relevance\u2014are greatly exaggerated. In fact, OPEC has been at the center of one of the biggest stories of 2020 aside from COVID-19: a historic deal that resolved the oil price war between Saudi Arabia and Russia.<\/p>\n

From 2016 to late March, the two oil powerhouses had been part of a loose alliance of OPEC members and non-member producers known as OPEC+. Its purpose was to stabilize the global oil market through voluntary production cuts. The alliance was a success until early this year, when COVID-19 effectively shut down China\u2019s economy and dramatically reduced its crude oil imports. To restore market balance, OPEC member Saudi Arabia asked OPEC+ member Russia to increase its production cuts. When Russia refused, Saudi Arabia stopped complying with its own production cuts and, instead, started flooding the market with oil. Russia followed suit, and plans to renew the OPEC+ agreement on April 1 were abandoned. Crude oil prices went into freefall, and U.S. shale oil producers started struggling to survive. It didn\u2019t help when COVID-19 began forcing lockdowns around the globe, resulting in plummeting demand for crude and even lower oil prices.<\/p>\n

The world was watching closely when Saudi and Russian leaders attended an emergency OPEC\/OPEC+ meeting on April 9. After three days of negotiations, OPEC and OPEC+ members agreed to massive production cuts starting with nearly 10 million barrels per day May 1. The cuts, which will gradually decrease, will continue through April 2022. While low demand remains a concern, by stabilizing the oil market, OPEC+ will still provide economic relief and save jobs around the world. Shortly after the product-cut agreement was finalized, exhausted Saudi Energy Minister Prince Abdulaziz bin Salman shared his exhilaration with\u00a0Bloomberg News<\/em>. \u201cWe have demonstrated that OPEC+ is up, running, and alive.\u201d<\/p>\n

Indeed. Both OPEC and OPEC+ are very much alive and as relevant as ever.<\/p>\n

A New Era?<\/strong><\/p>\n

Despite the condescending descriptions of OPEC I\u2019ve read in American media coverage, I am seeing signs that U.S. leaders are starting to look at OPEC with newfound respect. Even one of the organization\u2019s most outspoken American critics, President Donald Trump, had generous words for OPEC the evening before its April 9 meeting. \u201cObviously for many years I used to think OPEC was very unfair,\u201d Trump said during a press briefing. \u201cI hated OPEC. You want to know the truth? I hated it. Because it was a fix. But somewhere along the line that broke down and went the opposite way.\u201d<\/p>\n

Then there\u2019s Ryan Sitton of the Texas Railroad Commission, which regulates the exploration, production, and transportation of oil and natural gas in Texas. He responded to the Saudi-Russia oil price war by reaching out to OPEC and proposing statewide oil production cuts. After a one-hour photo call with OPEC Secretary General Mohammad Barkindo, Sitton was invited to attend OPEC\u2019s June meeting in Vienna.<\/p>\n

While I applaud Sitton\u2019s initiative, I couldn\u2019t help noticing what a departure it was from America\u2019s usual \u201cOPEC playbook.\u201d U.S. energy policy has been driven by a strong desire to \u201cfree\u201d the country\u2019s oil and gas industry from OPEC\u2019s influence. As recently as 2018, the U.S. House of Representatives attempted to pass the\u00a0No Oil Producing and Exporting Cartels Act (NOPEC)<\/a>. Had this harmful bill been approved, the U.S. Attorney General would have been empowered to bring antitrust lawsuits against OPEC and its member countries. The legislation likely would have jeopardized foreign investments in the U.S. oil and gas industry and cost America valuable commercial partnerships.<\/p>\n

How dramatically things have changed. Two years after NOPEC was proposed, we had a representative from the powerful Texas Railroad commission offering to work with OPEC to help balance the market.<\/p>\n

While it\u2019s unclear whether Texas will cut production, Sitton\u2019s decision to open communication with OPEC is a positive, and I hope other U.S. industry leaders will consider the same. Instead of viewing OPEC as the enemy, dismissing it, or avoiding it, why not learn to understand this important organization and lay the foundation for a productive relationship?<\/p>\n

Gaining Perspective<\/strong><\/p>\n

I suggest starting with Amazon\u2019s bestselling book,\u00a0Billions at Play: The Future of African Energy and Doing Deals<\/em>, which includes a chapter titled \u201cA Place at the Table: Africa and OPEC.\u201d Yes, the chapter covers the value OPEC membership offers African nations, but its insights are relevant to everyone with ties to the oil and gas industry.<\/p>\n

The background on OPEC\u2019s 2016 Declaration of Cooperation is particularly timely. It was that agreement among OPEC producers and 11 non-members that resulted in OPEC+. For the first time in OPEC\u2019s history, member countries agreed to work with non-member countries to stabilize the global oil market after increased U.S. shale oil production triggered low prices. Together, participating countries committed to voluntary production adjustments of 1.8 million barrels per day. Until the extraordinary chain of events set off by COVID-19, the OPEC+ alliance remained firmly in place.<\/p>\n

The book also delves into the reasons OPEC membership has so much to offer African oil-producers: strength in numbers and a commitment to unity. \u201cThe organization says that every new member adds to the group\u2019s stability and strengthens members\u2019 commitment to one another,\u201d the book explains. \u201cDifferent perspectives create a rich culture where colleagues can learn from one another, anticipate and respond to the complexity of today\u2019s oil markets, and ultimately, influence prices.\u201d<\/p>\n

It\u2019s not always a seamless process, but OPEC continues to achieve those objectives. And as we go forward, this kind of unified approach will remain critical. Most likely, the global oil and gas industry will be forced to deal with the economic impacts of COVID-19 and low oil demand for an unknown period of time. Instead of working at cross purposes, oil-producing countries will need to continue cooperating to find solutions, embrace opportunities, and keep the industry alive.<\/p>\n

Sebastian Wagner is the Chair of the German African Business Forum and the CEO of DMWA Resources, a pan-African energy marketing & investment firm. Worked for Trafigura & affiliated companies in oil trading, responsible for managing trading operations and pursuing pre-financing opportunities in around Africa<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By Sebastian Wagner Scan Western news about OPEC from the last few years, and a common observation tends to appear: OPEC had a huge influence on the global oil market … Read More<\/a><\/p>\n","protected":false},"author":24,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[11],"tags":[454,7351,837,955,7405,1827,1920,7409,2082,7407,2251,7408,7404,7406,2555],"class_list":["post-8120","post","type-post","status-publish","format-standard","hentry","category-top-news","tag-china","tag-covid-19","tag-exploration","tag-gas","tag-mohammad-barkindo","tag-oil","tag-opec","tag-prince-abdulaziz-bin-salman","tag-production","tag-ryan-sitton","tag-saudi-arabia","tag-saudi-energy-minister","tag-saudi-russia-oil-price-war","tag-texas-railroad-commission","tag-transportation","entry"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p5JWkQ-26Y","jetpack-related-posts":[{"id":8102,"url":"https:\/\/www.oilnewskenya.com\/index.php\/opec-ends-oil-price-war-awaits-g20-meeting-for-opec-deal\/","url_meta":{"origin":8120,"position":0},"title":"OPEC+ ends Oil Price War, awaits G20 Meeting for OPEC+ Deal","author":"","date":"April 14, 2020","format":false,"excerpt":"In a move to save the oil industry \u2014 facing the biggest crisis in its history \u2014 OPEC and Russia have forged ahead on new production cuts, with the OPEC+ group agreeing to eliminate 10 million barrels of crude per day for an initial two-month period to save a glutted\u2026","rel":"","context":"In "Top News"","block_context":{"text":"Top News","link":"https:\/\/www.oilnewskenya.com\/index.php\/category\/top-news\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2020\/04\/cea5e714b606624d2b431f32a78bba90.jpeg?fit=800%2C533&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2020\/04\/cea5e714b606624d2b431f32a78bba90.jpeg?fit=800%2C533&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2020\/04\/cea5e714b606624d2b431f32a78bba90.jpeg?fit=800%2C533&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/www.oilnewskenya.com\/wp-content\/uploads\/2020\/04\/cea5e714b606624d2b431f32a78bba90.jpeg?fit=800%2C533&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":8276,"url":"https:\/\/www.oilnewskenya.com\/index.php\/opec-extends-oil-production-cuts-until-the-end-of-july\/","url_meta":{"origin":8120,"position":1},"title":"OPEC extends oil production cuts until the end of July","author":"","date":"June 8, 2020","format":false,"excerpt":"The 11th OPEC and non-OPEC Ministerial Meeting was held via vide oconference, on Saturday, 06 June 2020, under the Chairmanship of HRH Prince Abdul Aziz Bin Salman, Saudi Arabia\u2019s Minister of Energy, and co-Chair HE Alexander Novak, Minister of Energy of the Russian Federation. 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