OPEC Pressures Saudi Arabia to Cut Oil Production
After months of increased production that has put consistent downward pressure on the price of crude oil worldwide, Saudi Arabia is facing dissent within OPEC. Other member nations have experienced major economic problems as the Saudi created glut has pushed prices down below $40 per barrel, their lowest since 2009. The other members of OPEC are now attempting to pressure Saudi Arabia to cut production in order to bring prices back to more normal levels, a tactic which the country and its rulers have historically endorsed.
This round, however, may be different. The broader purpose of the glut has been to decrease the production capabilities of American hydraulic fracturing firms by flooding the market with very inexpensive oil, thus making it unprofitable to extract U.S oil reserves. While several firms involved in U.S oil markets have laid off many of their employees and put further oil extraction on hold, the Saudi glut shows no signs of letting up any time soon. Estimated production rose to 10.45 million barrels per day during the month of July.
These market conditions have prompted other members of OPEC, the Organization of Petroleum Exporting Countries, to sharply criticize Saudi Arabia and look for ways to end the oil glut. The main hope seems to be an agreement with Russia, the world’s second largest oil exporter. Venezuela, in particular, has been pushing for a conference between OPEC nations and Russia, along with other non OPEC oil exporters. The hope is that if an agreement can be reached to temporarily reign in production among these nations, the price of a barrel of crude oil can be raised despite the Saudi Arabian production increases.