Now that the October meeting of the OPEC+ Join Ministerial Meeting has ended, it is curious why the group’s leaders, Russia and Saudi Arabia, haven’t, for at least a moment, pointed out their win. After all, we are going on four months with exceptionally stable oil prices. Whether or not this is the work of OPEC—and there is a good argument that it is not entirely—OPEC has managed to succeed at one of its main goals. But instead of using this moment to focus on this accomplishment, the leaders from Russia and Saudi Arabia spent their time warning again about overhanging instability.
OPEC and its recent partners identified jointly by the OPEC+ name have two informal goals: 1) oil prices that are high enough to satisfy the members but not too high to scare off consumers and 2) oil market stability, which provides a crucial benefit for the industry. Currently, oil prices are lower than OPEC countries would want. The Brent benchmark is hovering around $40 per barrel. However, the oil market is quite stable and has been since June.
The Saudi oil minister and son of the king, Abdulaziz bin Salman, thinks that OPEC’s manipulative hand is vital to controlling the market. He said, “It should be assuring for the market that we are attending to it with every bit of seriousness and attentiveness … it is a period that needs hands-on attendance.” However, the market may actually be extremely stable right now because of the overhanging uncertainties that are compelling a wait-and-see attitude from almost everyone. There is uncertainty about the coronavirus, about government responses to the virus, about fear over the coronavirus and about the U.S. presidential election. It is quite possible that the oil market stability will be over following the November 3 election.
However, at a time when the power and effectiveness of OPEC (and OPEC+) are regularly questioned, it might have made sense for the organization’s leaders to tout the recent stability. Instead, they warned of impending volatility. Part of OPEC’s strategy has been to assure the market that it is a stabilizing force. If OPEC wants the market to believe that it has power to impose stability, it should highlight recent success. OPEC could legitimately claim a win here; it should. OPEC (and OPEC+) missed a big opportunity to promote stability today.