June 2, 2016
As the ministers gathered in Vienna, Brent crude was trading at just under $50 a barrel – less than half the level it reached in June 2014 and a concern to oil-producing nations. The price briefly went above $50 last week for the first time this year.
The 13-nation group considered limiting oil production, usually their preferred way of boosting flagging prices.
But at Thursday’s meeting secretary general Abdalla El Badri said: “To come up with a number is very difficult to do. But at this time now the number that we are producing is reasonable to the market, the market is accepting it.”
But Iran, recently readmitted to world oil markets since the nuclear deal between Iran and the US in 2015 and now free of economic sanctions, has aggressively increased production.
Iran exported just over 2 million barrels of oil every day last month and this number is predicted to double, as they are currently producing around 3.8 million barrels a day.
Iran’s oil minister Bijan Zanganeh said that a doubling of exports of Iranian oil “has had no negative impact” on the market and “has been absorbed well”.
Iran had pushed for country quotas but the meeting ended with only a promise from Saudi Arabia not to flood the market and Iran re-stating its right to raise production steeply.
Saudi oil minister Khalid al Falih said: “We will be very gentle in our approach and make sure we don’t shock the market in any way.
Any agreement between Riyadh and Tehran would have been seen as a big surprise by the market, which in the past two years has grown increasingly used to clashes between the political foes as they fight proxy wars in Syria and Yemen.
However, the lack of agreement does not help poorer OPEC nations such as Venezuela, which is struggling with severe food shortages and inflation predicted to reach 700% this year.
Venezuela’s oil and gas sector is around 25% of its GDP.
They say the recent price recovery has been due to one-off factors, such as the effect of Canada’s wildfires and a Kuwaiti strike on production – not by OPEC’s strategy.
Venezuelan oil minister Eulogio del Pino said: “It’s not the situation of the market, it’s the circumstances. When the circumstances are removed, what is going to happen?”
IG Markets’ Bernard Aw noted that the lack of cooperation between OPEC members “has rendered the cartel somewhat ineffective”.
“Oil prices are still hovering near the $50 mark, and whether it will convincingly break above this level depends on how the OPEC meeting turns out,” he said in a note to investors.
Source: Sky News