OPEC’s production quota and the developments regarding Russia
by Şeyma Eraz
Jan 02, 2015 - 12:00 am GMT+3
by Şeyma Eraz
Jan 02, 2015 12:00 am
As of November, global markets were fixed on the crude oil production limit to be set by the Organization of Petroleum Exporting Countries (OPEC). Many oil exporting countries including Russia, which economically were damaged from the decreasing crude oil prices also suffered from the decision of OPEC to keep the crude oil production at the same level. OPEC's decision to not decrease production despite the falling prices was deemed as a sign that OPEC's power to determine oil sales prices was failing. Further, after OPEC's decision the RTSI index in Russia fell to the 5.5 level, the lowest in 2014 and dollar/ruble parity rose to the highest level in history.
Meanwhile Turkey became one of the countries that took advantage of the falling crude oil prices as such decline had a positive impact on the current account deficit, the competition power, input costs and inflation rates. Therefore, the BIST 100 index rose to the 87.048,14 level on Nov. 28 - the highest this year - and compound interest of benchmark fund fell to 7.71 percent. The decline in the price of Brent crude oil also continued in December and hit the lowest level within the past five years; $58.20.
Economist and Nişantaşı University President Dr. Kerem Alkin told Daily Sabah that OPEC countries had lost their influence on oil prices in the beginning of 1980, after the obstacles they put in oil markets in 1973 and 1978 because of the political conflict they had with the U.S. regarding Middle Eastern issues. Alkin added that as a precaution against OPEC countries, the U.S. established the New York Mercantile Exchange (NYMEX) in addition to the Chicago Mercantile Exchange to sustain energy security for Western economies. "NYMEX became one of the most active players of commodity exchanges and OPEC lost its role as a price setter long ago," said Alkin. He further added that although it seems to be a right decision for OPEC countries to keep output level steady to maintain their share in the market, it pressured global oil prices downward. "Energy dependent countries like Turkey will gain serious benefit from falling oil prices until global energy demands normalization," said Alkin and stressed that this normalization will be sustained once global growth discussions calm down. He noted that the expectations on oil prices will be fixed at around $60-65 per barrel in the first six months of 2015 and $65-80 per barrel in the second half of the year.As a result of all these developments, Russia increased indicative rates to 10.50 percent on Dec. 11. Due to increasing sanctions and continued decrease of crude oil prices as well as the increase in the dollar/ruble parity, Russia was forced to hold an extraordinary meeting a week afterward, resulting in a very strong increase of 17 percent in indicative interest rates. Despite the Russian Central Bank's interventions, the ruble continued devaluating before the dollar and the dollar/ruble parity rose to 79.519 level. Due to the sanctions of the U.S. and other Western countries, Russian equity markets also faltered and plummeted to the lowest level since March 2009. Russia took various measures to put an end to the volatility in the finance sector and as a result achieved economic stability.
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