No Changes Planned at OPEC Meeting

Tuesday, June 14, 2016

The 13 members of OPEC decided against making any policy changes during its most recent meeting earlier this month, dismissing calls from some members to institute a production cap in an effort to get oil prices to climb once again.

Instead, OPEC members will continue to produce as much oil as each nation wants despite a surplus of oil in the world, brought on in recent years from increased production in the United States and Canada.

“In the future we may need that (quota), but at this time the atmosphere is positive and the market is comfortable for us,” Qatar’s energy minister Mohammed bin Saleh al-Sada said after the meeting, according to CNN Money.

A production quota would, in theory, cause the price of a barrel of oil to rise. Oil has been at its lowest prices in more than a decade for the past year thanks to the surplus of supply. Those lower costs have hurt the oil-dependent economies of some OPEC members, including Venezuela and Nigeria.

OPEC’s strategy is to maintain market share a ride out this wave. Saudi Arabia, and other oil rich countries such as Iran – which only recently was able to resume exporting – believe this is the best strategy for OPEC, which has become increasingly divided in recent years.

What this means in the short term is that oil prices will likely stay flat or decline in price. As pointed out, oil futures have continued traded lower in the days since OPEC’s announcement.

The organization plans to meet again in November, but could call an emergency meeting before then, if needed. For Americans that want gasoline prices to remain low, OPEC’s announcement is good for businesses, but the oil market is constantly changing, so it’s something that must always be paid attention to.

We’ll continue to follow the oil markets here at Lowrance Machine Shop and keep you posted of any major news. To learn how we can help you and your business with our full range of precision-machining services, call us today at (281) 449-6524.