News / Economy

OPEC Shadow Boxes Ahead of Next Oil Supply Curb

Secretary General Abdullah al-Badri arrives for news conference following meeting oil ministers at OPEC headquarters, Vienna, Dec. 4, 2013.
Secretary General Abdullah al-Badri arrives for news conference following meeting oil ministers at OPEC headquarters, Vienna, Dec. 4, 2013.
Reuters
What is Saudi Arabia's bottom line for propping up oil prices unilaterally before it leans on the rest of OPEC to help share the burden?
 
At $112 a barrel for Brent crude, well above OPEC's preferred $100, it may not look like a hot issue just yet.
 
According to Ali al-Naimi, oil minister for Saudi Arabia, OPEC's biggest producer, the oil market is in “the best situation it can be” and at “the right price.”
 
That was reflected in Wednesday's straightforward decision by the Organization of the Petroleum Exporting Countries to renew for six months its 30 million barrel-a-day output cap for the first half of 2014.
 
But Iraq and Iran, second and third in the OPEC league table, made clear they have no interest in taking part in a collective cut should one be required next year.
 
With oil production from the United States rising fast and a number of OPEC members aiming to restore full output after sanctions and civil strife, a new OPEC deal may be required as early as its next meeting in June.
 
“It's not a question of if, but when,” said one OPEC delegate. “Maybe we'll talk about cuts in six months’ time,” conceded a delegate from one of OPEC's Gulf Arab producers.
 
Iran and Iraq both feel they are special cases because of production lost to sanctions, Iraq over decades under Saddam Hussein up to 2003 and Iran over the past two years for its nuclear program.
 
Iranian Oil Minister Bijan Zanganeh said Iran will take oil production back to 4 million barrels a day once sanctions are lifted even if oil prices drop to $20 a barrel.
 
“Under any circumstances we will reach 4 million bpd even if the price falls to $20 a barrel,” said Zanganeh. “We will not give up on our rights on this issue.”
 
Zanganeh said OPEC previously “has shown it's smarter than that” and normally made way for countries that had suffered setbacks to production.
 
His Iraqi counterpart said Baghdad would not contemplate being roped into an OPEC allocation that limits its production next year and wouldn't cut output.
 
“Why should we cut? There is no reason,” said Iraqi Oil Minister Abdul Kareem Luaibi.
 
Add Libya, hoping to convince armed separatist protesters to stop blocking production, and a significant slice of OPEC will plead special status should OPEC need a new deal.
 
Will Saudis go below 9 MBPD?
 
That would leave its most reliable producers, the core Gulf Arab countries — led by Saudi Arabia with Kuwait and the United Arab Emirates — to turn down the taps.
 
Saudi's Naimi shrugged off the prospect of a flood of additional supply next year.
 
“One source comes and another source disappears,” he said. Reporters, he added, were “preoccupied with Iran.”
 
“They are welcome, everyone is welcome to put in the market what they can, the market is big and has many variables — when one comes in another comes out.”
 
The Gulf producers clearly don't share Iran and Iraq's optimism about how fast they can lift output, privately forecasting growth next year from the two countries combined of about 500,000 barrels a day.
 
But if Libya restores full production that would add a million barrels daily.
 
And many are now forecasting that the U.S. energy renaissance, buoyed by shale, will add a million barrels a day for an astonishing third year in a row to reach 12 million bpd.
 
That would more than meet global demand growth next year on the 90 million bpd world market, requiring Saudi Arabia to drop towards 9 million by the middle of next year, already having dropped half a million bpd to about 9.7 million from record highs earlier this year.
 
“The Saudis would be prepared to cut back towards 9 million,” said an OPEC delegate. “But they would be reluctant to give up further market share without an all-inclusive OPEC agreement.”
 
“The Saudis will be prepared to trim production to make room for Libya and a bit of Iraq, but I think 9 million barrels a day is their line in the sand,” agreed Yasser Elguindi of Medley Global Advisors.
 
Oil markets may marvel at OPEC's ability to squabble about the next meeting or the one after, when there is nothing to argue about at the current one.
 
“This is shadow boxing. Iran has no way of bringing output back to 4 million immediately. As for Iraq, recent history indicates their targets are unlikely to be met,” said Bill Farren-Price of Petroleum Policy Intelligence.
 
“If the oil price really looks like over-shooting on the downside, it will be in everybody's interest — including Iran and Iraq — to find ways to stabilize the price. At that point, pragmatic decision-making will replace cheap rhetoric."

You May Like

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. More

Video Sudan School Becomes Target of Aerial Attacks

Dropout rate at an all-time high in South Kordofan state because many schools have been destroyed during 3-year civil war More

Tennessee Songbirds Fly Coop Long Before Tornadoes Arrive

Researchers say birds apparently alerted to danger by sounds at frequencies below range of human hearing More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8140
JPY
USD
118.81
GBP
USD
0.6402
CAD
USD
1.1597
INR
USD
63.066

Rates may not be current.