Oil Price Policy

• 04.09.2015, 18:18
•  World

Saudi Arabia which is the leading member of OPEC increased its oil output in March. Last month it was pumping 10.3 million barrels a day and it is going to produce now around the same quantity for the future, but not less. The oil Minister of Saudi Arabia Ali al-Naimi announced that they expect crude prices to raise in the "near future", but he did not mention the exact time. He also said that OPEC will not cut production without cooperation with non-OPEC countries. According to him oil prices will improve in the near future by supply-demand balance, which needs to be done with the cooperation of every subject in the oil market as it was before.

The price of Brent was $58.18 a barrel on Wednesday; it was trading at $ 115.06 on June last year. US crude is going to raise its output to 9.23 million barrels a day this year. Russia produces 10.71 million a day, Calgaryherald reports. There is a prediction on oil prices fall in May. Brent crude will fall 6 percent (or $3.55), US crude – 6.6 percent (or $3.56), Reuters reports.

Saudi Arabia cuts its oil prices in order to keep the share in the market, especially sales to Asia. The global competitors in the oil market with OPEC (Saudi Arabia) are Latin America, Africa and Russia. The biggest consumers were China and before it were the US, now the US is producing its oil.

Saudi Arabia as a leader in the oil market will not cut the prices until the rest of the players in the market cease production. The price war is mainly between Saudi Arabia and Russia, because both of them supply mostly to the same market (Asia). It is not beneficial for Russia to cut output as it does not want to lose its share in the market. On the other hand the other biggest oil producer in the region – Iran still is not in the market (because of the sanctions imposed on it) that means return of Iran with the full potential will shrink the shares of Russia and Saudi Arabia in the market. The only way to stabilize the oil prices is to set quantity of production and the prices to come to its equilibrium point by the supply-demand balance.