At the same time, they are preparing to offer projects to external oil companies. Meanwhile, in spite of some concern over Iraq’s security, it is reported as having produced well over 3mbpd in recent months. So, again, the OPEC dilemma increases as individual member countries strive to maintain and increase their market share. We have oil producers openly competing with each other and collectively competing with alternative energy sources, primarily shale.
The press conference opened earlier than expected with the news that OPEC will hold output at its current level and ask members to honour their quotas. Furthermore, much of what has been said in recent days was repeated again in the statement. I asked the question – “did OPEC now feel that a price close to $100 in the next four to five years would be too much to bear from consumers?” OPEC will not discuss price but the point was made, very clearly, by both Mr Al-Sada and Mr El-Badri that long-term investment would be needed to sustain supplies into the future. Although the figure was not quoted, as we are today, the market will determine price and also the level of investment but, back to the words of Rex Tillerson above, one cannot base investment on the price of today!
As an aside issue, the conference was briefed by the Head of Delegation of Ecuador on the ongoing arbitration process brought against the Republic of Ecuador by Chevron Corporation and Texaco Petroleum Company. The conference expressed its support for the Republic of Ecuador in the exercise of its sovereign rights over its natural resources, in accordance with international law, a right documented in the Algiers, Caracas, and Riyadh Summit Declarations of OPEC Heads of State and Government. Furthermore, the conference called for amicable negotiations and a good faith resolution for the dispute within a framework of utmost respect for the sovereignty of the Republic of Ecuador, and without resorting to ex parte pre-judgement measures that would make impartial solutions more difficult. I have put this paragraph in from the press release to illustrate the kind of issue that arises between oil companies and producer countries when circumstances change or one party wants to change the terms of the agreement.
We have moved a long from the $100+ era of last year to a price of around $45 at the beginning of the year back up to $65. As I said earlier in this report, the most likely scenario today is that we shall see little change in oil prices over the next two to three years at least, and probably longer. The revival from the long-term recession will continue, and the future for shale looks good for those countries that are able to and want to pursue it. OPEC will be meeting again on Friday, 4th December, and I shall follow the market in the meantime and report back after that meeting.
