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 Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the US are seeing gas prices dip below $3 a gallon More

Afghan Women's Soccer Team Building for the Future

A four-team female league was recently set up in Kabul; It will help identify players for the national team More

Video Koreas on Edge Amid Live-fire Drills

Pyongyang threatens nuclear test as joint US, S. Korean exercises show forces’ capabilities 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.
New Skateboard Defies Gravityi
X
November 21, 2014 5:07 AM
A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8050
JPY
USD
117.90
GBP
USD
0.6376
CAD
USD
1.1259
INR
USD
61.655

Rates may not be current.