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Vienna Hosts OPEC+ Oil Summit

Vienna is set to host an oil summit between the leaders of OPEC and other major global oil producers between Dec 5-6. The meeting follows in the wake of a G-20 meeting held in Buenos Aires at the beginning of this month where Saudi Arabian Crown Prince Mohammed bin Salman and Russian President Vladimir Putin publicly committed to continuing their previously established cooperative agreement, known as OPEC+. The significance of the upcoming Vienna meeting rests upon outlining the parameters for potential volume limitations in oil production across OPEC and non-OPEC cooperative partners in order to address the declining global prices in oil.

Russian President Vladimir Putin and Saudi Arabian Crown Prince Mohammed bin Salman. Photo.    Credit   : Pavel Golovkin / AFP

Russian President Vladimir Putin and Saudi Arabian Crown Prince Mohammed bin Salman. Photo. Credit: Pavel Golovkin / AFP

The drop in oil prices is attributed to a rise in U.S. oil production and overarching, “economic weakness,” permeating the worldwide oil market due to various extenuating political circumstances globally. As a result, OPEC leader Saudi Arabia has urged a reduction in daily oil barrel volumes across both OPEC members and those non-member major oil-producing countries now labeled as the ‘OPEC+’ group. Amongst OPEC+ countries rests Russia, who has come to be a dominant force on the global oil production scene. OPEC’s advisory recommendation for reductions yields a nearly 1.3 million barrel decrease daily, benchmarked on aggregate levels from October 2018. Concerning these reductions, Russia specifically would need to maintain a price of at least $40.00/per barrel in order to balance its projected budget for 2018. President Putin recently remarked that barrel prices of $60.00/ per barrel would be, “absolutely fine,” and the 2019 budget for Russia actually relies on a projected price of roughly $43.00/ per barrel.

Yearly Change in Oil output (OPEC, Russia, U.S.). Photo.    Credit   : EIA

Yearly Change in Oil output (OPEC, Russia, U.S.). Photo. Credit: EIA

Calls for Russian oil reduction by Saudi Arabia and OPEC lie in the range of a volume decrease of between 250,000 and 350,000 barrels per day. This stringent reduction lies in contrast to a purported Russian willingness to decrease by around 140,000 to 200,000 barrels per day instead. Prospects for the success of the Vienna negotiations focusing on the specifics of country reduction amounts remain dubious. While the enthusiasm generated from the seemingly cooperative spirits in Buenos Aires between Saudi and Russia appears hopeful, other voices doubtfully claim that Vienna will provide reductions insufficient to the levels needed to proactively move against foreseen market imbalances in the upcoming new year.

In response to these recent fluctuating events in the global oil industry, Qatar has announced plans to withdraw from OPEC effective at the beginning of 2019. Speculators wonder inconclusively whether Qatar will stimulate further remittance from cooperation or isolation from substantive decision-making by smaller, less vocally empowered nations, especially in conjunction with the rising power and influence of Russia as the saturated figurehead for non-OPEC oil producers. Moreover, major Russian oil producer Gazprom has since announced its extended intentions to raise oil volumes for 2019 by 50,000 barrels per day irrespective of the Vienna negotiation outcomes. Thus, the link between the negotiated and realistic effectiveness of the slated oil reductions concerning Russia and others remains to be seen as leaders prepare to meet in Vienna.