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Wednesday, August 23, 2017

The new Secretary General of OPEC was the Nigerian

The new Secretary General of OPEC was Mohammed Barkindo. The former head of the state oil company Nigeria has promised to increase contacts with countries outside the cartel. According to experts, initiatives Barkindo will not affect prices. Oil prices now depend on the balance between demand and supply and the level of stocks of petroleum products in the United States.

photo: Gennady Cherkasov

Technically Mohammed Barkindo was elected OPEC Secretary General a month ago, however, he formally will take office only on August 1. In this chair, he replaced the Libyan economist Abdallah Salem al-Badri, who led OPEC since 2007.

When Salem al-Badri has twice observed the rise and fall of the world oil industry. So, in December 2008, quotes “black gold” reached a maximum value of more than $143 per barrel. But in February 2009, has already been observed below $40 per barrel.

Similar to the current situation, isn’t it? In summer 2014, the barrel was estimated nearly $115. Now he’s closer to around $40, and sometimes fell over this mark.

But the fault is Salem al-Badri in these failures? According to the official, in early 2009, the barrel fell due to the global economic crisis. When prices are high the main producers tried to throw out on the market of raw materials, which led to oversupply of the fuel and, as consequence, falling prices. Then the problem was solved. OPEC decided to reduce the quota for oil extraction by 1.5 million barrels per day. Of course, they produced more than that amount. But their appetite has shrunk.

Now the same thing happens. Many analysts blaming Iran, which lifted sanctions and which may resume the export of “black gold” in the Western market. But while Tehran is preparing to expand, OPEC members the maximum increased production and export to earn as much as possible. As a result, the market formed the imbalance — the demand for oil exceeded the supply by 3 million barrels a day.

So most of the experts fault the Salem al-Badri in this not find. After all, the last 20 years the real power in the cartel was in the hands of the former Minister of oil of Saudi Arabia Ali al-Naimi (has held this position since 1995). He actually served as the ultimate truth.

So, in April of this year at a meeting of the independent producing countries and OPEC countries in Doha (Qatar) a number of participants, particularly Russia and Venezuela, has prepared a document providing for the freezing production at the level of January 2016 for the period up to October this year. But before the beginning of the meeting, Saudi Arabia, which was represented by Ali al-Naimi, and his allies are suddenly required to involve the agreement of Iran. The Tehran agreement was abandoned. He warned that he would agree to freeze only after will be released on the pre-sanctions output of 4 million barrels per day. It would have increased the difference between demand and supply by 1 million barrels per day in favor of the latter. Riyadh, most likely, was aware of Iran’s demarche.

As experts say, it is the lack of compromise in Doha and led to the resignation of Ali al-Naimi from the post of Minister. Of course, on the one hand, he is 81 years old. On the other, the health he does not complain, and live on his daily 10-mile walks can be found on Twitter. Meanwhile, it is quite possible to blame the failure of the Doha negotiations, because the low oil prices have seriously hit on the Saudi budget.

The new OPEC Secretary General Mohammed Barkindo already made a number of statements. So, he intends to strengthen the cartel’s cooperation with countries outside of the organisation, especially with Russia. The next meeting of our officials and the oil companies can be held until the end of the year. But will it lead to any positive result — not the fact.

According to the Director of Fund of power development Sergey pikina, the cartel has long ceased to play the leading function. Rather, he performs administrative and analytical tasks. “The main role played by two aspects: the balance between supply and demand, as well as the level of oil reserves and petroleum products in the United States. If the market reaches equilibrium, and the American stocks will decline, until the end of the year prices will be between $40 and $50 per barrel, and in 2017 will grow to $50-60”, — the expert believes. Now the cost of the barrel is a little over $43.

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