Tags: opec | iran | saudi | oil

Iran Joins Saudis in Resisting Oil-Output Curbs at OPEC Meeting

Image: Iran Joins Saudis in Resisting Oil-Output Curbs at OPEC Meeting
(Dollar Photo Club)

Friday, 04 Dec 2015 07:44 AM

Iran joined Saudi Arabia in saying it would keep on pumping despite oil prices hovering near a six-year low, giving the strongest signal yet that OPEC wouldn’t act at the group’s meeting in Vienna to curb the global supply glut.

As ministers from the Organization of Petroleum Exporting Countries gathered in Vienna, Iran said it would boost shipments after the lifting of international sanctions next year and wouldn’t accept any curbs until it had restored about 1 million barrels a day of output.

Saudi Arabia said it didn’t feel obliged to make cuts to production, which is running close to a record.

“We don’t expect OPEC to do anything,” Iran’s Oil Minister Bijan Namdar Zanganeh said on Friday as the group’s ministers sat down to discuss policy, including how to fit new member Indonesia into its output ceiling. "It seems that the global market will grow demand” amid oversupply of 1.5 million to 2 million barrels a day, he said.

With oil prices hovering near a six-year low, cash-strapped countries including Venezuela, Ecuador and Algeria are pressuring Saudi Arabia to cut production. A year ago, Riyadh spearheaded a decision to maintain output and fight for market share rather than cut production to sustain high oil prices. The move helped to send Brent crude, the global benchmark, down to $42 a barrel from near $100.

Saudi View

The Saudis, the world’s largest oil exporters, have stuck to their one-year-old view that any output cuts won’t work unless big producers outside OPEC, including Russia and Mexico, participate. If prices recover sharply, it could revive some U.S. shale production, displacing OPEC crude.

Saudi Arabia is willing to cooperate with anyone to re- balance the market, Oil Minister Ali al-Naimi told reporters on Friday after OPEC ministers arrived to discuss policy. The pressure isn’t solely on Saudi for output cuts, he said, adding that Iran’s return will do “nothing” to the market as demand for oil will strengthen next year.

“Demand is going to increase anyway,” according to al-Naimi, who said Saudi Arabia hasn’t cut investment. “Nothing has been curtailed. We have a responsibility to maintain our 12.5 million-barrels-a-day capacity.”

Russia, Mexico and other big producers outside OPEC have given no indication they would agree to any OPEC-led output cuts. Russian Energy Minister Alexander Novak said Thursday that the country doesn’t see a production cut as viable.

Informal Gathering

Venezuela is proposing taking 1.5 million barrels a day of production out of the market.

“All the countries, including the Saudis,” are very worried, Venezuela’s Energy Minister Eulogio Del Pino told reporters on Friday, citing a decline in oil prices after the past three OPEC meetings. “We estimate that in the second quarter of next year, inventories will reach 100 percent and we see a catastrophe in the prices"

Ecuador Oil Minister Carlos Pareja said an informal meeting of his OPEC counterparts on Thursday — unusual in recent years and held in a hotel rather than at the group’s headquarters — was "difficult.”

Nigerian Minister of State for Petroleum Resources Emmanuel Ibe Kachikwu said Saudi Arabia didn’t propose a cut at the meeting on Thursday. A solution to the market slump requires a global effort as OPEC pumps less than half the world’s oil, Kachikwu said on Friday in a Bloomberg TV interview in Vienna. Despite differences of opinion among members, OPEC has “common purpose” to find a solution to the price rout.

Conciliatory Tone

The divisions are a sign of how a year of low prices — and the prospect of more months of cheap oil — are hurting OPEC nations. The group’s annual revenue may fall to $550 billion from an average of more than $1 trillion in the past five years, the International Energy Agency said Nov. 10.

Iran has repeatedly said OPEC should reduce production to make room for its return to the market. OPEC pumps four-in-10 barrels worldwide.

Faced with dismay among members unable to balance their books, Saudi Arabia has adopted a conciliatory tone, promising to listen to all before a policy decision is made. OPEC watchers said the divisions make it more likely the group will re-affirm its current production ceiling of 30 million barrels a day on Friday.

Staying Course

"OPEC is likely to stay on course on December 4," said Gary Ross, chairman of New York based consultancy Pira Energy. OPEC needs consensus among all its members before changing the group’s output target.

The official ceiling is, however, largely symbolic as countries produce above it. OPEC pumped 32.1 million barrels a day in November, exceeding its target for an 18th month, according to a Bloomberg survey of companies and analysts. The overproduction is likely to worsen next year as Iran plans to pump an additional 500,000 barrels a day within weeks of international sanctions being lifted.

"We expect OPEC will likely maintain its production ceiling at the current level or adjust it upward slightly to reflect Indonesia’s re-joining the group while maintaining the goal of retaining market share in general," said oil consultancy Wood Mackenzie Ltd.

Indonesia Return

Indonesia, which left OPEC in 2008, has returned to the group. The country pumps roughly 800,000 barrels a day, so including it would bring OPEC’s official ceiling nearer 31 million barrels a day.

Brent crude closed on Wednesday at $42.49 a barrel, the lowest since 2009, when demand slumped during the global financial crisis. Brent futures climbed 1.7 percent at $44.58 as of 11:30 a.m. in London on Friday. International oil traders have said that unless OPEC reverses course, supplies will continue to overwhelm demand for months.

"The stock-build will continue to weigh on the market, with prices unlikely to move beyond the current range until well into 2017," Chris Bake, a senior executive at Vitol Group, the biggest independent oil trader, said Dec. 2.

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
Headline
Iran joined Saudi Arabia in saying it would keep on pumping despite oil prices hovering near a six-year low, giving the strongest signal yet that OPEC wouldn't act at the group's meeting in Vienna to curb the global supply glut.As ministers from the Organization of...
opec, iran, saudi, oil
963
2015-44-04
Friday, 04 Dec 2015 07:44 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved