When a UK bank, Standard Chartered warned that oil prices could fall even further to $10 per barrel, a price last seen during the Asian financial crisis in 1997, many stakeholders in the industry waved it aside. But Nigeria’s oil minister, Emmanuel Ibe Kachikwu saw the handwriting on the wall and called for an emergency OPEC meeting in March to address the falling oil prices. He was worried that the Organization of the Petroleum Exporting Countries, OPEC member states differed on how to address the situation as 65% of global oil supply comes from non-member countries. Those countries that said that the right time to begin to look at an extraordinary meeting would be when the price hits the $35 a barrel mark, seems to have found a common ground with Kachikwu.
The feeling within the organisation suggests that there is a shift from mistrust to a growing agreement among member states on how to end the global oil price disarray. “There’s increased conversation going on. I think when we met in December … they (OPEC members) were hardly talking to one another. Everyone was protecting their own positional logic. Now I think you have cross-logic … they are looking at what are the deficiencies, what is the optimum,” Kachikwu told Reuters in an interview.
Already, oil prices have sunk by over 70 percent – down near $30 per barrel over the past 18 months, following OPEC’s top producer Saudi Arabias’ announcement that it will drive higher-cost producers out of the market by refusing to cut production despite a supply glut. The result is a crashed price that has crippled some mono-economies like Nigeria that depend heavily on oil sales for income, and thus are unable to withstand the painful revenue drop.
But Kachikwu says, “We haven’t been sure that if we held those (emergency) meetings, that we could actually walk away with some consensus. A lot of barrels are tumbling out of the market from non-OPEC members, so the Saudi philosophy is obviously working. But it’s not influencing the price higher, which means that whether we like it or not some barrels are coming in from … members and non-members to cover whatever is dropping out.”
In an attempt to find a compromise, Venezuela’s Petroluem minister proposed a freeze on new production to place a cap on the growing glut while not requiring countries to surrender market share.
“Have we got to the point where we can say that there is a definite strategy? In terms of production reduction or freezing, no, I don’t think we have gotten there. But there is a lot of energy (behind the idea),” the Nigerian Minister of Petroleum said, adding, “As you get closer to the statutory (OPEC) meeting dates … you are going to see more people get active and try to find solutions.”