Texas oil companies complicate OPEC’s planned production cuts

HOUSTON – The Houston Chronicle says With oil prices at their lowest level of the year, OPEC+ is again struggling with when to begin increasing crude production, announcing Thursday it was delaying plans to begin unwinding previous supply cuts by two months. Complicating the decision-making process is the degree to which OPEC+ members such as United Arab Emirates, Iraq and Kazakhstan are now reliant on investment from foreign oil companies like Texas-based Exxon Mobil and Chevron, along with European majors BP and Total. Foreign investment in Middle East oil production has increased more than 50% to $62 billion over the past five years, increasing pressure on member states in OPEC+ to increase production, according to analysis by S&P Global.

“The aim of foreign investors is not to spend billions of dollars on new oil wells and then shut them in,” said Jim Burkhard, a vice president at S&P Global Commodity Insights. “If OPEC members want to continue to attract foreign investment, their investors need need to see some type of return. It’s part of the equation. You can’t untangle that.” OPEC, the Austria-based energy organization, has been setting production quotas for member nations in the Middle East, Europe, Africa and South America since the 1960s, raising and lowering global oil supplies in a bid to control commodity prices. For member states, many of whom depend on oil revenues for a large portion of their national budgets, it’s a matter of balancing of short-term financial needs with maintaining high prices for their crude. And between economic unease around the globe, along with increased production from the United States, Canada and non-OPEC members in Latin America, OPEC has been holding back production in recent years to try and raise prices.