Algerian President Abdelaziz Bouteflika’s government has begun a series of talks with oil producing countries, whether they’re members of OPEC or not, to find ways to reverse the nearly 9-month-old plunge in crude prices. But Algeria’s approach may conflict with OPEC’s own pricing strategy.
Bouteflika’s drive included a meeting on March 16 of Algeria’s energy minister, Youcef Yousfi, with Angolan Oil Minister Jose Maria Botelho de Vasconcelos and Haruna Ginsau, Nigeria’s ambassador in Algiers, the Algeria Press Service (APS) reported. Both are OPEC members. On Monday the president spoke of oil prices with Borge Brende, the foreign minister of Norway, a non-OPEC oil producer.
“The drastic fall in oil prices has had an extremely negative impact on the economies of all exporting countries, whether OPEC or not members of the Organization of Petroleum Exporting Countries,” Yousfi said after the meeting. (Related: Saudis Claim Conspiracy Theorists, Not OPEC, To Blame For Oil Price Crash)
Bouteflika has also invited other oil-producing countries to join the occasional talks. They include Azerbaijan, Colombia, Congo, Equatorial Guinea, Kazakhstan, Mexico and Russia.
APS said the point of the planned series of meetings is “to consider the possibilities to consolidate cohesion between the exporting countries so [as] to find [a] joint solution to this situation” of oil’s price crash. It didn’t elaborate.
The reactions of participants in the talks so far ranged from noncommittal to enthusiastic, according to APS. It quoted De Vasconcelos as saying only that he and others at the March 16 meeting “exchanged viewpoints and thinking on the international oil market situation.” (Related: Oil Crashes A Second Time - What’s Next?)
But the agency quoted Ginsau as characterizing the talks as an important step to stabilizing the price of oil. “The impact of the oil price decline is so important, especially for African countries, that it is necessary that we all remain together to share our experience and come up with strategies that would allow us to find a solution,” he said.
Several of the countries invited to the Bouteflika meetings are hurting financially because they rely heavily on oil for government revenues. Non-OPEC Russia, for example, has been forced to cut its budget and design a stimulus plan to deal not only with the low oil prices but also with Western sanctions.
And 10 of OPEC’s 12 members – all but Qatar and Kuwait – can no longer rely on oil exports to balance their budgets, according to an analysis by Bloomberg. And although Saudi Arabia is losing money, Bloomberg says, it can ride out a long period of low prices because its treasury has a financial reserve of nearly three-quarters of a trillion dollars. (Related: Alan Greenspan Joins The Debate Over Oil Prices)
The question is whether Algeria’s call for talks is at odds with OPEC. At its production-setting meeting in Vienna on Nov. 27, the cartel, led by Saudi Oil Minister Ali al-Naimi, refused to cut production, even though oil prices had been plummeting since late June.
Al-Naimi said the strategy was to allow oil prices to fall so low that OPEC’s biggest competitors, including US shale-oil producers, wouldn’t be able to afford to extract oil using methods that are more expensive than conventional production methods. It seems unlikely, therefore, that loyal OPEC members would join Bouteflika’s effort to restore oil prices in a way that runs afoul the cartel’s strategy.
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