The test for OPEC at their meeting next week on 5th June is to find the balance between holding onto their market share as the world’s largest oil producing organisation and appeasing its higher cost producing members who are increasingly growing restless from their reluctance to cut back production in order to give oil prices a boost. As oil prices have bounced strongly since the beginning of the year it is unlikely that they will announce a reduction to their daily output target of 30 million barrels a day, a target they have consistently been exceeding even in the face of last year’s crude price crash, proof they are more concerned about market share than market price, in an attempt to keep the US shale threat at bay. If we see no lowering of production oil prices are unlikely to rise much beyond current levels and certainly nowhere near the $100 a barrel OPEC ideally wants to realise, especially at a time when the world’s oil consuming engines of Asia and the US continue to see their economies slowing. As a result, this meeting has the potential to be an own goal for OPEC.
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