VIENNA: OPEC ministers were cautiously confident yesterday that the oil market is finally on the mend, cementing expectations that the cartel will keep crude gushing at a meeting in Vienna. “The market is improving,” Iraq’s Deputy Oil Minister Fayyad Al-Nima said a day before the biannual gathering of the Organization of the Petroleum Exporting Countries. “The market will become better in the second half of the year,” he predicted, in comments echoed by other delegates from the 13-nation group. The most powerful though, Saudi Arabia’s new oil minister Khaled Al-Falih – newly appointed by the dynamic young Deputy Crown Prince Mohammed bin Salman – was tight-lipped.
Kuwait is keen on maintaining dialogue between OPEC and non-OPEC members to help achieve greater balance in the oil market and wants to see a “fair” price for producers and consumers, the state’s acting oil minister told state news agency KUNA. Anas Al-Saleh also said an understanding was expected among OPEC oil ministers meeting in Vienna on a candidate for a new secretary general of the organization, KUNA said in a report overnight on Tuesday.
Traditionally OPEC, which pumps around a third of the world’s crude, has collectively cut back or increased output in an attempt to manage the volatile price of oil. But in the most recent drop, which has seen oil tumble from over $100 in 2014 to close to $25 in January, OPEC – driven by kingpin Saudi Arabia – has changed tack. Instead of reducing output, it has kept the oil flowing in order, experts say, to keep hold of market share by squeezing competitors – particularly US shale oil producers.
Although it has taken some time, straining even Saudi Arabia’s finances, the strategy appears to be bearing fruit, with non-OPEC output on course this year to fall sharply. The price per barrel, meanwhile, last week touched $50 for the first time in six months, making OPEC – riven by rivalry between Saudi Arabia and Iran – breathe easier. Suhail Al-Mazrouei, United Arab Emirates oil minister, said late Tuesday that he expected 2016 to be “the year of correction”. “The rules of the market, which is the supply and demand, are working,” he told reporters in Vienna.
Angola’s Jose Maria Botelho de Vasconcelos, oil minister, said that the price “tendency is a little bit positive”. However, Vasconcelos also said that Angola needed the price to rise further, while Venezuela’s oil minister expressed worries that the recent recovery might peter out. Venezuelan Energy Minister Eulogio del Pino, whose economy has been pushed to the brink by the weak oil price, said the recent rise was due to exceptional factors that have reduced global output. These included strikes in Kuwait, wildfires in Canada, disruption in Nigeria and lower output in Colombia, he said. “It’s not the situation of the market, it’s some circumstances,” he said. “When those circumstances are removed, what is going to happen?” Algeria’s Oil Minister Salah Khebri said a rebalancing of the market was “on track”. He added however that further “efforts” were needed.
Today’s meeting may meanwhile see OPEC name a new secretary general to replace Abdalla El-Badri, a Libyan who has been in the post since 2007. Del Pino said that he was in favour of Alí Rodriguez Araque, currently Venezuela’s ambassador to Cuba, getting the job. He previously held the position from 2001-2. Badri was due to step down in 2012 but has stayed in place because OPEC has been unable to agree on a successor.
Other candidates are thought to include Nigeria’s Mohammed Barkindo and Mahendra Siregar of Indonesia, according to Bloomberg News. Russian news agency Interfax quoted an unnamed source as saying that there was a “very strong probability” that it would be Siregar, a former deputy finance minister. Angola’s Vasconcelos said he backed Barkindo.
Falih was the first OPEC minister to arrive in Vienna this week, signalling he is taking the organisation seriously despite fears among fellow members that Riyadh is no longer keen to have OPEC as an output-setting organization. Falih was to meet fellow Gulf ministers later yesterday in a traditional gathering preceding OPEC.
Gulf OPEC members including Saudi Arabia are looking to revive the idea of coordinated oil-output action by major producers when the group meets today, a senior OPEC source said, but Iran signaled the country was not ready for any such pact. “The Gulf Cooperation Council is looking for coordinated action at the meeting,” the source said, referring to a group combining OPEC’s biggest producer Saudi Arabia and its Gulf allies Qatar, Kuwait and the United Arab Emirates.
Saudi Arabia effectively scuppered plans for a global production freeze – aimed at stabilizing oil markets – in April. It said then that it would join the deal, which would also have involved non-OPEC Russia, only if Iran agreed to freeze output. Tehran has been the main stumbling block for the OPEC to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.
Tehran argues it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over Iran’s nuclear program. Yesterday, Iran said its position had not changed and even though its exports were rising quickly it was too early for Tehran to join such a pact – meaning it would need an exemption, which Saudi Arabia has repeatedly resisted. “Iran supports OPEC’s efforts to bring stability to the market with fair and logical prices, but it will not commit to any output freeze,” Iran’s representative to OPEC, Mehdi Asali, was quoted as saying by Iranian oil ministry news agency Shana. “The issue of output rationing can be discussed after the market stabilizes,” Asali said.
“I don’t think there will be a policy change on Thursday, unless the Iranian minister comes with something new. If the Iranians say the freeze is dead, it is dead,” one delegate from a major Middle Eastern producer said. – Agencies