Daily reasons why OPEC didn't slash oil production

Tehran, Nov 30, IRNA - An English-language paper on Sunday commented on why the OPEC, on Thursday, chose not to cut crude output to combat US shale oil boom. The decision comes as oil prices are in freefall, hitting $72 per barrel — a record low in the past four years, noted 'Iran Daily' adding that OPEC agreed to maintain its ceiling of 30m bpd in a move which seems to contradict the organization’s earlier policies to respond to declining prices. Analyzing their decision from a political angle, the paper in its Opinion column believes that OPEC produces 40 percent of the world’s oil, the capacity of which can be used as an effective mechanism if trust exists among member states. Unfortunately, lack of trust exists among OPEC members with each following their own policies, regretted the paper. It is no exaggeration to say the oil producing bloc is not the leader in the global oil market, it said. Profitability has become a key issue for member states. It wouldn’t be economical for Iran if oil prices drop to below $100. The figure for Saudi Arabia is $90 while for Kuwait, the UAE and Qatar it is $70. Therefore, these countries would suffer less than Iran in a market where prices are going down by the day. Moreover, they have enough hard currency reserves while Iran does not. OPEC does not punish members who do not stick to its decisions. If fact, it cannot do anything in this respect when certain member states go against its policies in pricing and production, noted the daily, adding that the group faces a fierce competition from major oil producing countries namely the United States and Russia — each with a market share of nearly 14 percent. The current situation in the oil market indicates that OPEC is only struggling to maintain its share and is no longer a key player. In fact, it was impossible for the bloc to slash its oil production because it would lose its market share. Moreover, such a decision should have required coordination with major non-OPEC producers such as Russia, Norway and Mexico who have already announced they would not cut their capacities. Therefore, OPEC would be biggest loser if it had cut its crude production, concluded the paper./end