Gulf Opec members including Saudi Arabia are looking to revive the idea of coordinated oil-output action by major producers when the group meets today, a senior Opec source said, but Iran signalled the country was not ready for any such pact.
“The Gulf Cooperation Council is looking for coordinated action at the meeting,” the source said, referring to a group combining Opec’s biggest producer Saudi Arabia and other Gulf members Qatar, Kuwait and the UAE.
Saudi Arabia effectively scuppered plans for a global production freeze - aimed at stabilising oil markets - in April.
It said then that it would join the deal, which would also have involved non-Opec Russia, only if Iran agreed to freeze output.
Tehran has been the main stumbling block for the Organization of the Petroleum Exporting Countries to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.
Tehran argues it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over Iran’s nuclear programme.
Yesterday, Iran said its position had not changed and even though its exports were rising quickly it was too early for Tehran to join such a pact – meaning it would need an exemption, which Saudi Arabia has repeatedly resisted.
“Iran supports Opec’s efforts to bring stability to the market with fair and logical prices, but it will not commit to any output freeze,” Iran’s representative to Opec, Mehdi Asali, was quoted as saying by Iranian oil ministry news agency Shana. “The issue of output rationing can be discussed after the market stabilises,” Asali said.
At its previous meeting in December 2015, Opec failed to set any production policy including a formal output ceiling, effectively allowing its 13 members to pump at will in an already oversupplied market.
As a result, prices crashed to $27 per barrel in January, their lowest in over a decade, but have since recovered to around $50 due to global supply outages.
Those include declining output from US shale producers badly hit by low prices but also forest fires in Canada, militant attacks on pipelines in Opec member Nigeria and declining output in Venezuela, also a member of the group.
“The main story today is the one of declining output. The market is getting more pessimistic not only about non-Opec but also about Opec supply. Global demand is still growing strongly and that works in Opec’s favour,” said Gary Ross, a veteran Opec watcher and founder of US-based PIRA consultancy.
Yesterday, Venezuelan energy minister Eulogio Del Pino warned that supply outages have propped up prices in recent months but the global oil glut might build up again when missing barrels return.
“More than 3mn barrels are out of the market. When those circumstances are removed from the market, what’s going to happen?” Del Pino told reporters in Vienna.
Del Pino was a key architect of the failed output-freeze deal earlier this year when Opec and non-Opec producers including Russia had travelled to Qatar to agree on the agreement, which was previously supported by Saudi Arabia’s then-minister for oil, Ali al-Naimi.
Since the deal collapsed, Riyadh has changed ministers, appointing Khalid al-Falih as the head of a new, enlarged energy ministry.
Al-Falih was the first Opec minister to arrive in Vienna this week, signalling he is taking the organisation seriously despite fears among fellow members that Riyadh is no longer keen to have Opec as an output-setting organisation.
Al-Falih was set to meet fellow Gulf ministers later yesterday in a traditional gathering preceding Opec.
“I don’t think there will be a policy change on Thursday, unless the Iranian minister comes with something new. If the Iranians say the freeze is dead, it is dead,” one delegate from a major Middle Eastern producer said.