OPEC countries failed Thursday to agree on measures to influence crude supplies and prices – a missed opportunity to show the resolve that for decades let them set how much consumers and industries worldwide would pay for gas, heating and related necessities.
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Oil benchmarks headed lower in wake of the announcement as traders widely predicted a second successive quota stalemate, with the producers’ collective repeating the stance adopted at its last meeting in December 2015.
In fact, the price of SLC or Minas type oil in May 2016 also rallied by US$ 12.21 per barrel to US$ 49.46 per barrel, reflecting the rise in the price of several major crude oils on the worldwide market.
Oil ministers from the Organization of the Petroleum Exporting Countries are meeting Thursday morning in Vienna, where Iran and Saudi Arabia were expected to clash over output targets. The more harmonious atmosphere meant the group was able to appoint a new secretary-general – Nigeria’s Mohammed Barkindo – something it hadn’t been able to agree on since 2012.
The May 2016 edition of the International Energy Agency (IEA) publication announced that the oil production of non-OPEC countries in April 2016 fell by 0.125 million barrels per day to 56.6 million barrels per day.
With a recent rally in oil prices, OPEC ministers are under less pressure to act now as they wait to see how much of an impact a decline in production in the USA and other non-OPEC countries will have on global oil markets.
Before the OPEC meeting, Saudi Arabia had floated the idea of restoring a group production ceiling as a gesture to show it had no plans to flood the market and it was serious about making the gathering a success.
As a result, Brent crude futures held above $50 per barrel on Friday, trading at $50.19 per barrel at 0647 GMT, up 15 cents from the last settlement and nearly double January lows. US crude stockpiles dropped the third time in four weeks, according to a government report.
“We will be very gentle in our approach and make sure we don’t shock the market in anyway”, Saudi Arabian Energy Minister Khalid Al-Falih told reporters after the meeting. It had tumbled more than $1 earlier.
Al Falih reiterated Saudi’s stance that Iran must be part of any future OPEC agreements to curb output.
Although OPEC regularly ignores its own output targets and there was no suggestion anyone would cut production Thursday, even a token gesture could have helped to boost prices.
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. Instead, he described the cartel as “a dynamic, living organ responding to changes”.
There are two ways of looking at the OPEC meeting in Vienna, and neither is wrong.
ICE gasoil for June changed hands at $448.00 a metric ton, down $1.75 from Thursday’s settlement. “For today’s market conditions, OPEC is responding appropriately”.
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Information for this article was contributed by Stanley Reed of The New York Times, by George Jahn of The Associated Press and by Mark Shenk and Caroline Alexander of Bloomberg News.
