“The price volatility before and after the OPEC meeting has been marginal and confirms the new normal of the market’s lack of interest for OPEC as a trading price input”, Olivier Jakob, managing director of consultant Petromatrix GmbH, said in an emailed note.
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Lately, Saudi Arabia had suggested a production freeze at current output levels to help boost the prices.
According to Reuters reports, tensions, however, were less acute yesterday as Saudi Arabia’s new energy minister, Khalid al-Falih, showed that the Kingdom wanted to be more conciliatory while his Iranian peer, Bijan Zanganeh, kept his criticism of Riyadh to an unusual minimum.
He said the meeting would focus on choosing a new Opec secretary general to replace Abdalla El-Badri of Libya.
Zanganeh said Wednesday that a production cap would be “no benefit” for Iran, which only returned to world oil markets after global sanctions linked to its nuclear programme were lifted in January. “OPEC is alive, OPEC will be a very important segment of the economy of the world”.
Following the news, United States benchmark for crude oil West Texas Intermediate (WTI) fell 1.53% to $48.26 per barrel, while global benchmark Brent dipped 1.29% to $49.08 per barrel.
More immediately, Saudi Arabia is at odds with Iran, its longtime OPEC ally that is ramping up production to pre-sanctions levels despite ample supply. 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. “The market is rebalancing as we speak”, he said.
It has taken some time – straining even Saudi Arabia’s finances, to say nothing of on-the-brink OPEC member Venezuela – but the tactic now appears to be working at last. The crude program is created to maintain capacity at 12.5 million barrels per day, he said. Any ceiling below 32.5-million bpd would represent an effective cut.
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”.
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As at May 26, prices stood at $50.26 per barrel making it the highest in 7 months after a sharp decline in oil prices. “It is bearish short term for oil prices”.
