VIENNA, Austria (AP) — After failing to rescue the depressed oil market by slashing production this spring, OPEC now hopes a new round of cuts might do the trick.
But analysts and traders are skeptical, saying that even if oil producers find the will power to follow through on new promises about restraining output, it might not be enough to push prices higher any time soon.
The cuts are a key issue at an OPEC meeting opening in Vienna on Wednesday.
OPEC’s average crude price plunged to $10.11 per barrel early last week, less than half the group’s official target of $21. Prices have not been so low since 1986, a year that brought disaster to the global oil industry, from the palaces of the wealthy Persian Gulf sheiks to the small mom-and-pop producers who had to shut down their wells in the United States.
The current cheap oil prices have been a bargain for consumers, including gas-hungry Americans getting ready to drive off on summer vacations, but they are devastating to OPEC and other producers.
The biggest OPEC exporters, including Saudi Arabia, Venezuela and Iran, have teamed up with smaller OPEC countries with pledges to cut some 620,000 barrels of production daily, out of current output of about 28.2 million barrels. Non-OPEC producers Mexico, Russia and Oman are trying to help out with promises to remove another 203,000 barrels a day from the glutted market.
But even if all those cuts are made and sustained — and experts have big doubts about this — traders say more than 1 million barrels a day need to be removed.
Three producers, Nigeria, Algeria and Libya, had not announced any new cuts ahead of the meeting.
Experts believe these producers soon will chime in with cuts, and that some of the small players will clamor for bigger cuts from Saudi Arabia. The world’s top oil producer and exporter has pledged the biggest cuts, 225,000 barrels per day — but with more than 8 million barrels a day of production it has far more oil than anybody else.
Indonesia, hit by the double whammy of its own economic collapse and low oil prices, has said it has no plans to cut back.