Why OPEC doesn’t influence the oil market

In recent years the capabilities of the Organization of Petroleum-Exporting Countries, which was established to stabilize oil prices, has reduced significantly. Experts state that it cannot influence prices and regulate the oil world market anymore, due to wide-scale oil production by countries which are not members of OPEC – Russia, the U.S., China, Canada, Brazil and Kazakhstan.

Konstantin Simonov, the Director General of the National Energy Security Fund, is sure that the cartel does not influence the market at all.

According to the expert, the crises in OPEC will provoke a serious crisis in relations with Saudi Arabia and Iran: “Iran demands the return of its quotas, which were taken after the European Union ban on the purchase of Iranian oil.”

Simonov doesn’t expect a fall in oil prices to 20-30 dollars, and especially a freezing of those prices for several years: “I personally associate it with the interests of the United States, because for them it is extremely unprofitable. There is an element of punishment of Russia, but on the other hand, their own shale projects are being punished. No matter how much you talk about miracles in technologies, when the amount of drilling in the U.S. and the amount of drilling works decreased by 40%, I read that there are so many changes in the technologies in a few months, that with shale extraction, drilling became kind of unnecessary. Although we see that later, in the summer, the number of drilling operations began to grow when prices began to affect it.”

The expert says that “shale projects are very diverse, but still, the cost of most of the shale projects in the United States cannot fall below 50 dollars. If prices will go lower, respectively, projects will start to fall apart, as we have already seen.”

With regard to Russia, according to Simonov, it has no problems with the sale of oil: “We sell as much as we produce. But we have problems with production. And we cannot, like Saudi Arabia, just increase this production and win through volume. Nevertheless, we should artificially lower this production. Still, the cost of the majority of our projects today is lower than the world price of oil. In Western Siberia, it is still below 10 dollars per barrel. Therefore, in this respect, our industry, even at prices of 40 dollars, still remains a supplier of money to the budget. And thus, my medium-term outlook for the next year or two is also somewhere in the horizon of 50-75 dollars.”