Oil continues to plunge, but OPEC does not seem interested

Monday was another tough day for oil, as crude prices dropped more than 2 percent, with WTI finishing Feb. 23 below $50 a barrel for the first time in almost two weeks.

In a Financial Times report OPEC President Diezani Alison-Madueke said that she would call an emergency meeting of the OPEC if prices continue to decline. Oil prices reacted positively to the news, and then they dropped again.

Being president of OPEC, Alison-Madueke is also Nigeria's oil minister, who should be interested in lifting oil prices mainly because low crude put her country on the verge of a deep crisis. The Nigerian currency, the naira, has hit all-time lows against the dollar, terrorist attacks by the Islamist group Boko Haram have worsened, and national elections were recently postponed more than a month. 

Again, it would be rational for Nigeria to lobby oil prices elevation. However, Bloomberg reporter gives arguments why OPEC emergency meeting, as well as the body's policy shifts are unlikely:

1. Another OPEC delegate told Bloomberg News that the organization has no plans to hold an emergency meeting. OPEC is scheduled to meet in June, and all 12 members must agree to hold a special meeting in the interim.  
2. It is hardly possible that Saudi Arabia, OPEC's biggest producer, would agree to such a meeting, not to mention actually cutting production. Saudi Oil Minister Ali Al-Naimi has said OPEC won't change course even if prices go to $20 a barrel. 
3. Even if a meeting were called, it's not clear whether OPEC is capable of mustering support to cut sufficient production to boost prices. It would require imposing a shrinking market share for oil-dependent economies that are already stretched. 
4. Even if OPEC members were to cut production enough to increase oil prices, how would the legions of U.S. oil producers respond? Probably by putting all those idled rigs back into action, adding more supply to the market and undermining OPEC's efforts. 

Thus, it is highly possible that today's talk of an emergency meeting was simply meant to underpin unstable markets. Promises of taking action sometimes remove the need for taking action. 

If this is just a promise, though, it comes at a risk for OPEC. The fact that markets brushed off the threat so quickly may imply that OPEC's threat is losing credibility.