Following weeks of oil price fluctuations as major producers have signaled output cuts, then backed off those promises, then signaled cuts once more, the United Arab Emirates’ oil and gas minister urged moderation, while calling a $40 per barrel price “not something that is sustainable,” Reuters reported.
“This is now more of a market and international responsibility, and we are all committed in OPEC to work with others to find a solution,” Suhail bin Mohammed al-Mazrouei said at the triennial World Energy Congress in Istanbul Wednesday, according to Reuters. “Let's not expect huge changes and leaps. We need to be realistic.”
After two days of zigzagging, Brent crude oil, a global indicator, fell from a high of $52.84 to below $52.40 on Wednesday morning, perhaps in line with the minister’s softer stance. Oil prices spiked Monday after Russian President Vladimir Putin voiced his readiness to join the Organization of Petroleum Exporting Countries’ (OPEC) decision to sharply cap its output in an effort to boost prices that have generally been sagging over the past two years.
“Russia is ready to take part in joint measures to limit production and calls on other oil exporters to do the same,” Putin said at the World Energy Congress Monday, in reference to OPEC’s announcement that it would keep production at between 32.5 million and 33 million barrels per day—a decision the cartel will finalize in November. “We support the recent OPEC initiative to set limits on production and hope that OPEC’s November meeting will fix this proposal in concrete agreements, sending a positive signal to markets and investors and, of course, helping to reduce speculative activity and avoid new price fluctuations.”
For Russia, a country for which nearly 13 percent of gross domestic product (GDP) stems from oil production, and the UAE, where 19 percent of GDP comes from oil, the decline in the commodity’s price over the past two years poses a major economic risk. By producing less than the world demands, Russia and OPEC—of which the UAE is one of 14 members—hope to stimulate their economies by colluding to gouge prices.
“The GCC [Gulf Cooperation Council] countries… did not miss an opportunity to support any effort which could expedite market stabilization if all participate,” al-Mazrouei said at an energy forum in late September, according to his ministry’s website. “I hope all OPEC members will be supportive to any initiative to speed up the market recovery.''
Their fears of a less stable market may gain ground after the conclusion of this week’s World Energy Congress. A report from the international conference warned that the global surge in use of renewable energy, along with accords like the Paris Agreement, would lead to “falling [energy] prices and a decoupling of economic growth and GHG [greenhouse gas] emissions.” Crude oil prices saw the largest percentage decline of any energy source—with a 73 percent drop—the report also said.
OPEC famously caused prices to skyrocket in the early 1970s, sparking a recession in the U.S., when it colluded to establish an oil embargo, gaining its reputation as a cartel. If al-Mazrouei is right, they’ll play a little nicer this time.