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Now that the October meeting of the OPEC + Join Ministerial Meeting is over, it is curious why the group’s leaders, Russia and Saudi Arabia, have not signaled, at least for a moment, their victory. After all, we’ve had exceptionally stable oil prices for four months. Whether or not it is the work of OPEC, and there is a good argument that it is not entirely, OPEC has succeeded in one of its main objectives. But instead of seizing this moment to focus on this achievement, the leaders of Russia and Saudi Arabia spent their time again warning about the prevailing instability.
OPEC and its recent partners jointly identified by the name OPEC + have two informal goals: 1) oil prices high enough to satisfy members but not too high to scare consumers, and 2) oil market stability, which provides a crucial benefit for the industry. Currently, oil prices are lower than the OPEC countries would like. The benchmark for Brent is around $ 40 a barrel. However, the oil market is quite stable and has been since June.
Spot price of Brent in Europe in dollars per barrel since March 2020
The Saudi oil minister and son of the king, Abdulaziz bin Salman, believes that the manipulative hand of OPEC is vital to control the market. He said: “I should assure the market that we are serving it with all seriousness and attention … it is a period that needs practical assistance.” However, the market can be extremely stable at the moment due to the prevailing uncertainties that are forcing almost everyone to wait and see what happens. There is uncertainty about the coronavirus, about the government’s responses to the virus, about the fear of the coronavirus, and about the US presidential elections. It is quite possible that the stability of the oil market will end after the elections on November 3.
Yet at a time when the power and effectiveness of OPEC (and OPEC +) are regularly questioned, it might have made sense for the organization’s leaders to promote recent stability. Instead, they warned of impending volatility. Part of OPEC’s strategy has been to assure the market that it is a stabilizing force. If OPEC wants the market to believe that it has the power to impose stability, it should highlight recent success. OPEC could legitimately claim a victory here; should. OPEC (and OPEC +) missed a great opportunity to promote stability today.
