Russia and OPEC Disagree Over Oil Prices
Will it be helpful for developing countries' economies?
The Organization of Petroleum Exporting Countries is a group consisting of 14 countries whose main export is oil. This organization was founded on September 14, 1960, with only five countries as its members. Now it has expanded to more countries. The recent meeting between the OPEC countries on Thursday has led to major issues regarding oil production in the countries.
During the meeting, OPEC has pushed for a bigger than expected decrease in the oil prices due to support towards the countries that have been hit with the epidemic of coronavirus. This decrease in price is majorly due to the reduced demand for oil in the world as China and major other countries which have been affected by the COVID-19 are not buying oil due to a large decrease in oil usage. Russia and OPEC disagree over oil prices as Russia wants to increase the prices of oil as the country needs the revenue to stabilize its economy.
OPEC gave the proposal to sideline 1.5 million barrels per day until the end of 2020, which was rather surprising as it was expected to cut off only 1 million barrels per day. But after an informal meeting that was held between the ministers of OPEC later on Thursday evening that the group now wanted the cut to run till the end of this year.
Kazakhstan, along with Russia and OPEC disagree over oil prices by saying that they had not agreed to a deeper cut that would increase the risk of collapse in the cooperation that has lead to the sudden increase in the prices since 2016. Russia and OPEC disagree over oil prices as they already had a deal of 2.1 million barrels per day in place for the cuts. OPEC said that after the massive outbreak of the novel coronavirus has decreased the amount of oil export by diminishing the economic activity around the globe.
Global oil prices as Russia and OPEC disagree over oil prices
Russia and OPEC disagree over oil prices, including Saudi Arabia, as they have been pushing towards a notable cut to lift oil pricings that have reduced 20% since the start of the year but struggled to win over Russia. The alliance between Russia and Saudi Arabia were the only thing that was keeping the collapse of the world oil market at bay.
But now the collapse is threatening to drown the industry into a free fall that could lead to a massive disaster. Due to Russia and OPEC disagree over oil prices, the global market has seen a significant swift in the oil pricing on Friday, which will provide a positive impact of the developing countries who are not affected by the virus.
The fundamental disagreement is between Saudi Arabia and Russia, which was somewhat disruptive as both countries had a very great relationship between them. During the meeting where Russia and OPEC disagree over oil prices, Russia was inclined towards dropping the cost of oil lower that would be a blow to the United States oil export, but that would directly affect Saudi Arabia whose economy is less adaptable towards lower prices and disagrees with implementing it.
This suggests that Saudi Arabia and Russia will revert back to its terms before they had a deal in 2017, which would lead to the dropping of all production restraints on both countries. If the agreement between the two countries is broken, Saudi Arabia will benefit from it as the country can produce around 2 million barrels of oil per day on short notice as compared to a few thousand barrels per day by the other Middle Eastern countries.
Russia would also benefit as the country could lift its oil output by 300,000 barrels per day within a short time. This will be further discussed in the upcoming OPEC meetings.