With financial markets unrecognisable from even a decade ago, the oil producers’ focus on supply commitments is laudable but out of tune with oil-consuming nations’ wider concerns over the market. The level of oil production is no longer the only, or even the most important, element in the pricing of crude.
The weakening dollar is eroding the value of Opec’s dollar-denominated currency reserves by the day. It is puzzling, therefore, that the cartel was unwilling to either reassess its links with the greenback or act on the rapid ascent of speculators and hedge funds, who now have significant influence in setting the price of crude oil.
Saudi Arabia, the de facto leader of Opec, wisely steered moderate GCC countries away from Iran and Venezuela’s radical political agendas. The two nations remain a threat, however, and the kingdom is the only member with the clout to effectively take on the pair.
Saudi Arabia insists it and the wider group’s priority is to keep to ambitious production promises, although the timing of new capacity investments outside the kingdom remains unclear. With so many agendas at play, Opec’s veneer of a unified approach is faltering.
Much of the problem in agreeing on any united approach stems from the irregular schedule of Opec’s strategy meetings.
Despite holding regular production meetings, the Riyadh summit was only the third opportunity in Opec’s 47-year history for the cartel to analyse its role and future.
The kingdom’s hesitancy in pushing for a new agenda to address wider market concerns is an opportunity lost. If the cartel is to maintain its influence in the future, it needs to work out how it intends to deal with the new dynamics of the marketplace.