OPEC: History Tells Us that the Current Oil Price Regime Will Not Last

The latest OPEC Bulletin states that while the current oil price regime will not last, stakeholders "have a vested interest" in joining forces to achieve a recovery.

Published the day before the December 4 Organization of Petroleum Exporting Countries (OPEC) Ministerial talks in Vienna, the OPEC Bulletin commentary acknowledges that with crude oil struggling to stay at above $40 per barrel, times are "very challenging" and "In particular, there is now a real danger the production capacity additions needed to meet future demand will be in jeopardy.

"Ironically, that could result in prices eventually spiking in the other direction."

In calling for stakeholders to join forces, the uncredited commentary cites Bob Dudley, chief executive officer of BP, who told delegates at the recent Kuwait Oil and Gas Show and Conference he had seen prices collapse four times in his career, and "while they created real stress at the time, the industry adapted and recovered each time."

However, Dudley also told the delegates that during periods of low oil prices, "companies need to demonstrate rigorous cost and capital discipline as they look to generate value in a lower price environment."

He added that the era of 'easy' oil "is behind us — there are new challenges to recovery."

The OPEC Bulletin commentary concludes that concerted cooperation amongst the key oil and gas players is "the only way forward," and "that means serious dialogue, primarily among the producers, but also between the producers and the consumers.

"History tells us that the current oil price regime will not last; but is it not better for the stakeholders that have a vested interest in providing a stable oil market to join forces and bring about a measured and orderly recovery?"

Last month, a leaked internal OPEC report revealed that the organization expects crude prices to remain under pressure through to 2019.