Barkindo: Why OPEC Increased Crude Oil Production

Barkindo: Why OPEC Increased Crude Oil Production

Output proposal preceded Trump’s tweets, says Russian oil minister
By Ejiofor Alike with agency reports

The Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), Mr. Muhammad Barkindo, has dismissed suggestions that pressure by the United States President, Mr. Donald Trump, played a role in OPEC’s decision to increase oil production.

This is coming as Russian Oil Minister, Alexander Novak, has disclosed that his country’s push to increase oil production came independently, and dismissed the suggestion that public pressure from the US played a role in its decision.

OPEC and non-OPEC members, including Russia, have reached a compliance agreement to raise oil output by one million barrels per day (bpd) in order to balance supply and demand in the second half of 2018.

Barkindo told the News Agency of Nigeria (NAN) yesterday that OPEC and non-OPEC ministers agreed to increase oil supplies, which had remained unchanged for 18 months.

Barkindo said the decision to increase oil prices by one million barrels per day, starting July 1, 2018, was taken without political influence.

Trump had on April 20, tweeted “Looks like OPEC is at it again with record amounts of oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!”

He also tweeted on June 13 that “Oil prices are too high; OPEC is at it again. Not good.”

Again, on June 22 as OPEC was concluding its meeting on whether to hold or increase crude oil supply, Trump tweeted, “Hope OPEC will increase output substantially. Need to keep prices down.”

In his reaction Barkindo said, “The impact of geopolitics is visible everywhere in this industry, and therefore our efforts to insulate the organisation from geopolitics have never been more challenging than now.

“The founding fathers of this organisation designed it in a way that will be an apolitical organisation focusing on the industry and as a technical body that advises member countries. So politics is not for us in the organisation. We remain focused as an apolitical organisation and will remain focused on our core responsibility of trying to manage the market, especially the instrument of supply management to maintain stability at all times,” Barkindo explained.

He said OPEC had transformed and that was why the organisation remained a strong voice in the global energy industry.

He said since he took over the leadership of the organisation in August 2016, the membership had grown from 13 to 16 as result of unrelenting negotiations.

He said to make the organisation more attractive, the OPEC secretariat was designing a framework that would allow countries to join the organisation as part-time members.

“The family is growing and for us, the more the better. Equally important is the fact that for the first time, we have been able to establish a Declaration of Cooperation that brought 25 countries to share responsibility to this one industry that we all belong. We are trying to institutionalise this cooperation because we all agree that we are better together. That is why we are focusing on how we can stay together,” he explained.

“We are now developing that framework. This will allow countries to join OPEC as full members, some as associate members,” he said.

On the growing force of US Shale in the crude oil market, Barkindo said OPEC had successfully established a channel of communication with shale oil producers, which he said would further stabilise the market.

“Without the shale revolution in the US bringing in now over five million barrels per day, the world would have faced probably one of the worst energy crisis.

“We have been able to establish a communication channel so we now understand ourselves much better.

“In a meeting in Houston, we agreed that we belong to the same boat and the Berlin Wall between us, we all agreed served nobody any good.

“In fact some of them were present at the 7th OPEC international seminar which held here in Vienna,” he said.

In a related development, Russia’s oil minister has dismissed the suggestion that public pressure from the US played a role in his country’s decision to push for increase in oil supplies to the international market.

When asked if tweets by the US president urging OPEC to keep prices down factored into the country’s move, Novak told CNBC that “the US is just another consumer, like the rest of consumers, and when we make decisions we take into account the interests of the consumers, not just those of producers.

“I would like to stress that our offer to increase production volumes in June was made well before the appearance of certain tweets. I’d like to note that Russia had proposed to ease the quotas back at the end of last year, and we began to discuss in detail in February this year,” the minister said.

Russia, the world’s largest oil producer, came to the meeting hoping to put 1.5 million bpd back on the table.

But the figure agreed upon should be “sufficient” for the time being, Novak said.

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