Oil price gambles At its previous meeting in December 2015, OPEC failed to set any production policy, effectively allowing its 13 members to pump at will. As a result, crude prices crashed to $27 (24 euros) per barrel in January – their lowest in over a decade. While some such as Kuwait and Qatar appeared to lean towards the Saudi Arabian way of thinking – agreeing on the need for an output ceiling – others such as Venezuela and Algeria seemed to agree with Iran, which said an output ceiling must be accompanied by a country-specific quota system.
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Tensions were less acute on Thursday as Saudi Arabia’s new energy minister, Khalid al-Falih, showed Riyadh wanted to be more conciliatory and OPEC decided unanimously to appoint Nigeria’s Mohammed Barkindo as the group’s new secretary-general.
This would give Tehran a quota of about 4.7 million barrels per day (bpd), which is well above the market’s estimate of current Iranian output of about 3.5 million bpd. “We all tolerated the dropping of oil prices”, al-Sada said.
The Organization of the Petroleum Exporting Countries (OPEC) intends to continue strengthening cooperation with non-cartel oil producing states, especially Russian Federation, the newly-elected head of the organization said Thursday.
Bob Minter, analyst at Aberdeen Asset Management Investment, said: “This should have been an easy meeting to re-establish Opec relevance, but they missed the opportunity”. Although it is still responsible for more than a third of world production, that clout has eroded since the 1980s, as outside output increased and members looking to maximize income increasingly ignored OPEC production ceilings.
Non-OPEC output is falling sharply and prices last week briefly rose above $50 for the first time in six months, although they have softened slightly since. Ministers at Thursday’s meeting could instead agree on a sliding ceiling that could shift between two benchmarks, both above 30 million barrels a day. Those sources such as Russian offshore oil, Canadian oilsands oil and USA shale oil have flooded the market, pushing down prices and leaving OPEC nations fighting among themselves for market share.
Jason Schenker, president and chief economist of market research firm Prestige Economics, said the strategy of OPEC and the low oil price have influenced U.S. Shell oil, making many companies cut job positions and earn less profit.
OPEC member Iran has been ramping up production to its pre-sanctions levels despite the recent supply glut.
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The ministers also agreed to admit Gabon as the 14th member, effective July 1.
