The proposal, floated by new Saudi Arabia energy minister Khalid Al Falih, would have attempted to limit OPEC oil output to a range of 31.8 million to 32.5 million barrels per day.
Advertisement
For decades, the 13-nation cartel was able to regulate prices by throttling or increasing production.
Production outages in Canada, Nigeria and elsewhere have taken barrels off the market in recent weeks, boosting prices and removing some incentive for OPEC members to cut back.
One way out would be abandoning attempts to set a firm production target. That would be a first.
Since Iran’s 2015 nuclear deal entered into force in January and sanctions were lifted, Tehran has aggressively ramped up output, and is unwilling to stop now.
Tensions between the Sunni-led kingdom and the Shi’ite Islamic Republic have been the highlights of several previous OPEC meetings, including in December 2015 when the group failed to agree on a formal output target for the first time in years.
The two sides also agreed to continue coordination between the public and private sectors in the two countries to enhance cooperation in the fields of trade, investment, finance, energy, industry, agriculture construction, science, education, culture and business. The Saudis subsequently said they would not cap output if Iran didn’t do the same, dooming the gathering to failure.
“It is bearish short-term for oil prices”.
US crude inventories have fallen in recent weeks but remain near the highest level in more than 80 years, a sign of the global glut of crude that has weighed on oil prices since mid-2014.
That dashed market expectations for a heavier drop of 2.5 million barrels, but still indicated solid demand in the world’s top crude consumer.
While that’s still only half of what crude fetched as late as two years ago, the increase is easing some of the pain for poorer members such as Algeria, Venezuela and Nigeria that depend on crude as their main income.
He reiterated that Russian Federation did not expect any new actions from the cartel and said he kept his forecast of an average oil price for 2016 at between $40 and $50 per barrel. “OPEC will be powerful, will be strong”.
Saudi Arabia was pumping at an average of 10.25 million barrels of oil per day (bpd) in May, slightly up from 10.15 million bpd in April, a Reuters survey showed. The oversupply was caused by the increase in production in the United States and also by the fact that OPEC continued to build up its own production.
Advertisement
OPEC isn’t going to stop flooding the market with oil any time soon. That, plus resurgent output from Iraq and post-sanctions Iran, helped push down prices, with the desired effect of making shale production increasingly uneconomical.
