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

    US Lawmakers Vow to Continue Immigrant Program for Afghan Interpreters

    Congressional inaction threatens funding for effort which began in 2008 and has allowed more than 20,000 interpreters, their family members to immigrate to US

    Brexit's Impact on Russia Stirs Concern

    Some analysts see Brexit aiding Putin's plans to destabilize European politics; others note that an economically unstable Europe is not in Moscow's interests

    US to Train Cambodian Government on Combating Cybercrime

    Concerns raised over drafting of law, as critics fear cybercrime regulations could be used to restrict freedom of expression and stifle political dissent

    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.
    Baghdad Bikers Defy War with a Roari
    X
    June 28, 2016 10:33 AM
    Baghdad is a city of contradictions. War is a constant. Explosions and kidnappings are part of daily life. But the Iraqi capital remains a thriving city, even if a little beat up. VOA's Sharon Behn reports on how some in Baghdad are defying the stereotype of a nation at war by pursuing a lifestyle known for its iconic symbols of rebellion: motorbikes, leather jackets and roaring engines.
    Video

    Video Baghdad Bikers Defy War with a Roar

    Baghdad is a city of contradictions. War is a constant. Explosions and kidnappings are part of daily life. But the Iraqi capital remains a thriving city, even if a little beat up. VOA's Sharon Behn reports on how some in Baghdad are defying the stereotype of a nation at war by pursuing a lifestyle known for its iconic symbols of rebellion: motorbikes, leather jackets and roaring engines.
    Video

    Video Melting Pot of Immigrants Working to Restore US Capitol Dome

    The American Iron Works company is one of the firms working to renovate the iconic U.S. Capitol Dome. The company employs immigrants of many different cultural and national backgrounds. VOA’s Arman Tarjimanyan has more.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video New York Pride March A Celebration of Life, Mourning of Loss

    At this year’s march in New York marking the end of pride week, a record-breaking crowd of LGBT activists and allies marched down Manhattan's Fifth Avenue, in what will be long remembered as a powerful display of solidarity and remembrance for the 49 victims killed two weeks ago in an Orlando gay nightclub.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9030
    JPY
    USD
    102.41
    GBP
    USD
    0.7470
    CAD
    USD
    1.3038
    INR
    USD
    67.919

    Rates may not be current.