Jazan - Abdullah Al-Faifi
Cut agreement enhances oil price index
While Western oil industry circles continues to make contradictions especially disregarding efforts exerted by OPEC in managing oil markets, today Sunday is the 6th day of the validity of oil reduction agreement that was approved by the Organization on December 7, 2018 with 1.2 million barrels per day distributed to oil producers from outside and within OPEC. The Western oil circles are currently promoting this concept that describes OPEC's recent oil-cutting agreement “disappointing”, pointing out that there was a possibility to increase the magnitude of this reduction agreement recently signed. This is attributed to the absence of the effects on the oil markets after signing the agreement directly. These western circles surged the wave of optimism. This contradicts with the previous stances adopted by these western circles, as this wave kicked off early this month. Therefore, the repeated contradictions experienced by the Western oil circles completely stripped them of credibility. However, OPEC’s key role in the oil markets cannot be bypassed or overlooked. When casting light on the orientation of the western media in oil markets, many points become clear-cut in this regard. On April 18, 2018, British Daily Telegraph’s Andrew Crichlow claimed that the Kingdom is seeking to raise oil prices to cover its current economic reforms. It is unusual that Crichlow was not aware of the Kingdom's annual budgets and oil prices approved for these budgets. The Kingdom bases its budgets on the low price levels. This price is USD 70 for a barrel, a matter which refutes all claims promoted by the Western oil media that do not consider the other factors affecting the oil markets.
Western media data are often based on conspiracy theories in the oil markets. OPEC oil producers, led by Saudi Arabia give preference to balancing economic interests as well as maintaining the health of the world economy. At the beginning of the first quarter of last year, optimism prevailed in the oil markets as a result of improved oil prices and reached USD 60 for Brent crude in the light of OPEC’s strive to bring balance back to oil markets and reduce the volume of oil surpluses then. OPEC managed to cut oil surpluses and withdraw 270 million barrels of surpluses of markets within one year in the period between January 2017 and the same month of 2018 at a decline rate amounting 79 per cent. This is the culmination of the efforts of the OPEC which lasted 15 months, a matter which resulted in balancing oil markets and prompted many analysts at that time to say that the prices would hike due to the limited supply in the markets. The last year saw many arduous efforts exerted by OPEC at the end of the second quarter of 2018, specifically on June 24. The Organization also held a meeting in the Austrian capital Vienna where a decision to increase oil production was taken by one million barrels per day, as of the beginning of July for the same year. In addition, the OPEC’s Ministerial Committee with the participation of independent producers held a meeting in Algeria at the end of the third quarter on September 22, 2018 amid a relaxed atmosphere in oil markets. The Committee took the decision to continue to abide by the agreement to cut oil production by 100%. The OPEC also concluded 2018 with a ministerial meeting on December 7, resulted in a decision to reduce oil production by 1.2 million barrels per day, and the share of the Member States was 0.8 million barrels per day and the share of independent producers 0.4 million barrels per day for six months starting from January and ending at the end of June.
Concurrently with the state of optimism that began to appear in the oil markets with the start of the current month, oil prices become safe from any sudden declines and fluctuations. Since January 1, the price index becomes stable and this index is accompanied by a gradual hike. Since the first of January, the oil price gained confidence of observers and those interested in the oil industry. The prices began to take an upward trend that reflects the start of the growing impact of the oil reduction agreement, which began early this year. In addition, most expectations of the oil industry reveal that the correction and balance will be during this quarter of the year following a wave of declines in the fourth quarter of last year.