0850 GMT July 23, 2019
Under the OPEC's schedule for the 173rd meeting on November 30 in Vienna, the ministerial meeting is going to end in at most three hours.
Such a short and exact planning implies that OPEC members outlook regarding oil market developments is very close to each other whether it is Iran, Saudi Arabia or any other member.
This is a very good news because it means that the members and especially Iran and Saudi Arabia, despite political rivalry in the Middle East, are able to leave behind their political disputes when it comes to meeting their foreign exchange revenues, in particular when oil prices are low.
Furthermore, it could be argued that OPEC is a specialized international organization which, under its charter, seeks to meet foreign exchange needs of their countries aside from the foreign policy of its members.
Even though these arguments are true to a great extent but they don't explain the reality of the unprecedented coordination between Iran and Saudi Arabia in their oil policies fully, especially if we look at the very recent history of spill-over of political differences into the decision-making processes of OPEC and non-OPEC gatherings.
For instance, if we go back to early meetings of 2016, when international oil sanctions against Iran were lifted, we see that despite low oil prices, Saudi Arabian officials including then oil minister, Ali Al-Naimi and Crown Prince of Saudi Arabia, Mohammad bin Salman, insisted that Iran should shoulder a burden in an oil freeze plan which would have capped production at January level, a view that Tehran was against, arguing it had the right to raise its oil production to pre-sanctions level of about 4 mbd.
The result of the standoff was catastrophic not only for OPEC but also for non-OPEC because when Doha meeting in April 2016 failed, oil prices tumbled below $30 per barrel.
So, despite the clear impact of geopolitical tensions on OPEC decision-making processes, it is somehow very interesting and positive that a maximum three-hour meeting plan will be enough to reach consensus on OPEC members position regarding its strategy for next year.
Now, what are the reasons behind this close coordination in oil policy despite continuing geopolitical tension in the Middle East?
It seems changing the balance of power in OPEC's traditional factions could explain part of the reason behind close cooperation in the oil market.
Since June this year, Riyadh's relations with Doha, another member of OPEC and a member of the PGCC deteriorated. Four members of PGCC are also the members of OPEC of which only the UAE has a common stance with Saudi Arabia while Kuwait and Qatar are not as close as they were in the past.
Similarly, relations between Saudi Arabia and Iraq is not close enough even though Saudi Oil Minister Khalid al-Falih visited Iraq last month, during which he called for increased economic cooperation and praised existing coordination to boost crude oil prices.
On the other hand, those OPEC members in North Africa, including Algeria and Libya and Venezuela and Ecuador in Latin America won't come along with any other policy in OPEC except what Saudi Arabia pursues right now.
Algeria played a key role in the extraordinary meeting of OPEC in September 2016 in Algiers, where Saudi Arabia after more than two years of market share strategy, decided to join a cut production plan, excluding Iran, Libya, and Nigeria.
The other point is that non-OPEC, at least 10 countries and especially Russia, are supportive of cutting oil production in order to remove the glut from the oil market and improving the prices which their low levels have hurt their foreign exchange revenues.
Low oil prices could be very damaging to Russian economy which like Iran and Saudi Arabia is involved in Syria conflict and in addition to that felt the impact of the West sanctions due to the annexation of Crimea in 2014 and its foreign policy towards Ukraine.
But aside from foreign pressures, domestic dynamics including budget deficit, which hit approximately $100 billion in 2015 and financing proxy war in Syria, direct military intervention in Yemen and the high expenses of buying arms are the most important things that have convinced Riyadh to look for cooperation in the process of balancing oil market and improving oil prices.
Arresting several princes including billionaire Alwaleed bin Talal and many other well-known former officials who are facing corruption charges as well as a decision for listing at least five percent of the giant Saudi Aramco in coming years are the other ways Saudi rulers are seeking to balance their finances, therefore higher oil prices is a good leverage to meet financial needs of the country.
Thus, it is not surprising that the prince of Saudi Arabia announces two weeks ahead of OPEC meeting that the country is supportive of extending cutting oil output by 1.8 million barrels a day until the end of next year.
While the most conservative member of OPEC offers the most radical views regarding improving oil prices, why should OPEC's ministerial meeting behind closed door to last more than three hours?