OPEC failed to agree on an overall crude output ceiling at key
talks in Vienna Friday, ministers said.
Iranian oil minister Bijan Zanganeh said the oil producer group's
failure to agree on an official output level meant that member
countries would pump as much as they wished.
"OPEC will do the same as before. Anybody will produce as much as
they want. Practically, there is now no ceiling for OPEC," he said.
"There are two viewpoints within OPEC. Some think this trend will
work out and will be beneficial to the members in the long term and
another group think short-term interests should be considered too."
Expectations, even earlier Friday, had been for a rollover of
current policy based on the 30 million b/d ceiling in place since
January 2012 and maintained a year ago when Saudi Arabia persuaded
OPEC not to cut output but to defend its market share against rising
non-OPEC production.
While ministers were still meeting, Reuters and Bloomberg reported
that the group had agreed a new ceiling level of 31.5 million b/d.
At a press conference after the meeting ended, OPEC secretary
general Abdalla el-Badri said OPEC had not included a ceiling figure
in its communique because it hoped to continue negotiations with
independent producers on managing supply.
NEGOTIATE
"One of the reasons that we did not really mention an amount is
because we are looking to negotiate with non-OPEC more and see how
we can reach a collective effort that all of us should contribute to
the market," he said.
Another factor in not settling on a ceiling figure was Iran's full
return to the market at some point next year, Badri said.
"We will have to accommodate Iran one way or the other. And also the
production changes from time to time," he said.
"So we decided to postpone this decision to the next OPEC meeting,
until the picture will be more clearer for us to decide on a
number."
Nigerian junior minister and OPEC's current president Emmanuel
Kachikwu said OPEC had taken "cognizance of current actual
production, which is above the 30 million b/d, and decided that
reducing that is not going to make much of an impact on the market."
There had been a lot of ideas on the table, he said.
"But the logic was simple. Even if we did cut by 5%, there wasn?t
any evidence that that was going to make a substantial impact, Again
Iran is just getting ready to come into the market, so 5% of what
are you going to cut? We need to see what Iran brings in to the
market. Thirdly we?ve had a drop of 2 million barrels, largely
contributed by natural attrition mechanisms of costs and demand and
largely contributed by non-OPEC producers. We felt comfortable that
we just need to wait and watch at this time."
OPEC said it would next meet on June 2, but Kachikwu said it was
possible that an extraordinary meeting could take place before then.
VIRTUAL CEILING
Iraqi oil minister Adel Abdul-Mahdi said the mood inside the meeting
had been good and that OPEC still had a "virtual ceiling" because
"we all know the capacity of each country."
Oil prices have been volatile through the afternoon, Brent falling
at one point to $42.67/barrel from an intra-day high of $44.82/b.
Brent is currently trading around $43.24/b.
"The oil price went down because of false information that came from
inside saying that we set the ceiling at 31.5 million b/d,"
Abdul-Mahdi said.
This week's talks have been characterized by confusing signals as to
the likely outcome of the meeting.
On Thursday, a Saudi delegate rejected as "baseless" a media report
that the kingdom was preparing a proposal for an eventual OPEC cut
of 1 million b/d that would require the participation of
sanctions-hit Iran and strife-torn Iraq as well as non-OPEC
producers such as Russia, Mexico, Oman and Kazakhstan.
Iran's Zanganeh had already responded angrily to the report, saying
Tehran's planned output and export increases following the expected
lifting of sanctions next year were not negotiable.
An informal meeting of several ministers later Thursday produced
"lots of disagreements," Zanganeh said.
The prospect of an output cut, as proposed by Venezuela, diminished
when Russia and Mexico quickly said they had no intention of cutting
output, and by Friday morning, a senior OPEC delegate was saying
that it appeared unlikely OPEC would change the ceiling.
"It doesn't seem there is a change," he said. "But we don't know."
Neil Atkinson, director of analysis at Lloyd's List Intelligence,
said the outcome of the meeting did not mean that any additional oil
would be produced.
"Only Saudi Arabia and other Middle East Gulf countries have any
scope to increase production and they are unlikely to do so with the
oil market already suffering from excessive supply that has seen
stocks of crude oil and products reach a record level of 3 billion
barrels," he said.
"By the time OPEC meets again in June 2016 we will know more about
the fates of Iran and the shale oil producers in the United States
and whether or not oil prices have stabilized between $40-$50 a
barrel. In the meantime this is no consolation to those members of
OPEC who have been particularly badly affected by the collapse in
crude oil prices from $115 a barrel in June 2014 to close to $40 a
barrel today."
--Staff report,
newsdesk@platts.com
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