S. Arabia ponders a future without OPEC

Tehran, Nov 10, IRNA -- Saudi Arabia’s top government-funded think tank is studying the possible effects on oil markets of a breakup of OPEC, a remarkable research effort for a country that has dominated the oil organization for nearly 60 years.

The effort coincides with new pressures on the Saudi government, including from the US, where President Trump has accused the organization of pushing up oil prices, and from investors who distanced themselves from the kingdom after the brutal killing of a US-based Saudi journalist, WSJ reported.

While the think tank’s president, Adam Sieminski, said the study hadn’t been triggered by Mr. Trump’s statements, a senior adviser familiar with the project said it provided an opportunity to take into account the criticism from Washington. Depending on the findings, the study could offer a defense of the organization and the Saudi role in it.

The research project doesn’t reflect an active debate inside the government over whether to leave the Organization of the Petroleum Exporting Countries in the near term, according to people familiar with the matter.

Since its creation 58 years ago, the Organization of the Petroleum Exporting Countries has rebounded from a number of existential crises.

Saudi Arabia, Iran, Iraq, Kuwait and Venezuela created OPEC in Baghdad with an eye toward countering cheap oil prices, which had been fixed by Western oil companies. The organization has since added 10 members.

Senior Saudi officials see the study as a high priority economic-policy inquiry, according to these people. Mr. Sieminski said he ordered the study, and that the analysis isn’t unusual and explores topics his researchers normally delve into.

The report is part of a wider rethinking among senior government officials in Saudi Arabia about OPEC, according to the people familiar with the matter. Officials are grappling with the assumption--shared increasingly in the oil industry--that oil demand will one day peak, the senior Saudi adviser said.

In this context, the study is seen among senior officials as an exercise in gaming out how markets might react if demand falls so much that OPEC loses sway and disbands, the adviser said.

For decades, Saudi Arabia and its fellow members have insisted the Organization of the Petroleum Exporting Countries is a crucial global economic institution--a forum by which big producers can mete out oil production to keep prices from getting too low or too high.

Critics have accused OPEC of manipulating oil prices at the expense of big oil-consuming economies such as the US, and Mr. Trump has been outspoken in his condemnation. A group of US lawmakers has pushed legislation that would effectively label OPEC an illegal organization.
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