OPEC keeping production low for nine more months

OPEC keeping production low for nine more months

OPEC, the Organization of Oil Exporting Nations, voted to continue to limit output for nine more months.

OPEC had already cut production in response to falling prices.

Thomas Streater, head of Research at MB Commodities Capital, said Saudi Arabia, the de facto OPEC leader, benefits from low output and higher prices because the nation has taken on a lot of debt.

Saudi Arabia is trying to modernize and diversify, to insulate its economy from the vagaries of the oil  market.

He said other OPEC nations are not necessarily happy, but are going along—for now.

“Saudi needs a higher oil price because they want to maximize the valuation of the Aramco IPO next year,” Streater explained.

“Iran, because they’ve drawn down a lot of their floating storage, they have less barrels to sell into the market, so they don’t want to really cut production too much. Iraq has got its own issues,” he said.

Non-OPEC nations like Russia that produce significant volumes of oil will meet later on May 25. Generally these nations support OPEC’s decisions.

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