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 its Gulf allies Qatar, Kuwait and the United Arab Emirates.
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 Opec to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.
Tehran argued 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
“The issue of output rationing can be discussed after the market stabilises,” Asali said.
A source familiar with Iranian thinking said Tehran was not willing to discuss a freeze as Iran had not yet reached pre-sanctions output levels.
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 production 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.
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 three million 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 ahead of today’s Opec meeting.
Del Pino was a key architect of the proposal to freeze oil output earlier this year.
“If you see the decline in the non-Opec and all the situation that happened in several countries, production has been maintained the same in the last three or four months,” Del Pino said.
“So de facto we have freeze conditions,” he said.
Opec and non-Opec producers including Russia had travelled to the Qatari capital of Doha to rubber-stamp the deal, which was previously supported by Saudi Arabia’s then-minister for oil, Ali al-Naimi.
Since then Riyadh has changed ministers, appointing Khalid al-Falih as the head of a new, enlarged energy ministry.
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.
Kuwait’s acting oil minister Anas al-Saleh said on Tuesday he favoured maintaining dialogue between Opec and non-Opec members to help achieve balance in the market.