OPEC oil ministers want to see a stable U.S. dollar and higher oil prices before they start to increase investment. OPEC maintains that because oil is priced in U.S. dollars it wants the U.S. to keep the dollar stable.
But these are secondary problems. The main thorn in OPEC's side is Russia. Russia has overtaken Saudi Arabia as the world's biggest oil exporter.
Unlike OPEC that is trying to keep a lid on production, Russia has increased production to a record 10 million barrels per day. Russia and other non OPEC countries were not invited to attend the OPEC meeting.
Saudi Arabia believes that OPEC will not increase investment until the price of oil averages $75 per barrel for the year. Russia, on the other hand, will maintain it present investment plans.
OPEC is faced with defection in the ranks as producers are not adhering to production quotas. The group's compliance has fallen to 70%. The Saudis are seeking 80-85% adherence to production quotas.
What we have here is a world power struggle in the oil market between OPEC and Russia. OPEC has ruled the roost for lo, these many years, and suddenly Russia has overtaken Saudi Arabia as the world's largest oil exporter. OPEC tries to control production to keep prices high, while Russia is staying on track with increasing its production.
How all of this plays out in the marketplace is uncertain. Russia's competition with OPEC is a good factor in keeping a lid on oil price increases.
Do you believe that OPEC will get higher oil prices?
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