The most inflamed differences between Saudi Arabia

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Saudi Arabia and Iran's differences are difficult to resolve OPEC's long-term strategy is like looking at flowers in the fog

Saudi Arabia and Iran's differences are difficult to resolve OPEC's long-term strategy is like looking at flowers in the fog

May 4, 2016

[China paint information] according to a source quoted by foreign media on Tuesday (May 3), the organization of Petroleum Exporting Countries (OPEC) has not yet reached an agreement on a long-term strategy, Saudi Arabia opposed the proposal of its main competitor Iran to strengthen OPEC's control over the oil market. This implies that the two sides still have deep differences on the future path

The OPEC Council met in Vienna on Monday (May 2) to discuss the latest draft of the long-term strategy (LTS). Two OPEC sources revealed that although the meeting made progress on some issues to ensure the normal operation of the machine, Saudi Arabia, which is at the core, did not agree with the proposal put forward by Iran. Iran proposes to include "effective production management" as one of the challenges that OPEC should address

according to the previous version of the LTS draft seen by foreign media in November last year, Iran proposed that OPEC adjust the first of the 10 challenges listed by itself to "maintain market stability", so as to apply it to supply management

Iran wrote in the previous draft, "the first challenge can be expressed in a more clear way as follows, but also under the pressure of environmental challenges: the oil price is stable at an ideal level, while maintaining effective production management according to the dynamic changes of market conditions."

however, the fundamental question is whether OPEC will take the traditional role of controlling supply and pushing up oil prices as the most important agenda. Member states such as Iran and Algeria hope to play such a role; In other words, in response to the rising supply of non OPEC oil producing countries, OPEC will no longer try to manage the market

the above is consistent with Saudi Arabia's ideas, and prompted OPEC to change its strategy and refuse to reduce production in November 2014. However, this policy change continues to cause differences in the organization, and Member States disagree on the need to support reasonable oil prices and increase revenue

this discussion is of great importance to the oil industry and the overall economy, as the oil price further collapsed after OPEC decided not to reduce production. The international crude oil price hit a 12-year low in January this year and is now about $45 a barrel

in the earlier lts draft, there were comments from Iran and Algeria on measures to support the oil cone replacement price, such as price targets or lower limits, and the restoration of the OPEC quota system. However, Saudi Arabia and its Gulf OPEC allies opposed the resumption of the quota system, which was abolished in 2011

according to the source, OPEC officials will meet again this year to try to reach an agreement on a long-term strategy. According to two OPEC sources, the area of disagreement is relatively small. OPEC oil ministers will meet again in Vienna on June 2 to discuss production policies

however, the possibility of OPEC to resume production management still seems low. Last month, after Saudi Arabia asked Iran to participate, OPEC members and non member countries failed to reach an agreement on freezing production, and the core technology is in the hands of Switzerland, Japan and other countries

after the sanctions of western countries were lifted in January, Iran, which is trying to regain market share, has refused to limit production; However, the source said that once the production returns to the pre sanctions level, Iran will take restrictive measures

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