Saudi Arabia’s new energy minister rallied Opec support for maintaining production yesterday, as a near doubling of crude prices since January eased tensions among oil exporters.
Khalid Al Falih said the 13-member group should “encourage the rebalancing” of the market as prices recover from the worst crash in more than a decade. But he told reporters at the meeting in Vienna that it was “premature” to try to restrict output, as demanded by some exporters, when production growth was already declining and demand was responding to lower prices.
“We feel the market is rebalancing as we speak,” Mr Falih said, adding that Riyadh wanted “to work collaboratively[to] steward the market back to equilibrium”.
Weaker Opec members, such as Nigeria and Venezuela, had called for more action to boost the price further as they face economic and political crises.
But even they seemed content to put on a largely united front. Emmanuel Ibe Kachikwu, Nigeria’s oil minister, reflected the mood of the meeting, saying: “The market is doing good.”
Brent, the international benchmark, has soared 80 per cent since touching a low for the year in late January. It hovered around $50 a barrel yesterday. West Texas Intermediate, the US benchmark that has surged almost 90 per cent since its low for the year, was trading just above $49.
Tension between Iran and Saudi Arabia has raised fears that Riyadh may increase production to press its rivals, but Mr Falih said the kingdom had no intention of swamping the market and would not go on a “flooding campaign”.
Saudi-led Opec has since late-2014 kept production high in the face of falling prices, putting pressure on higher cost oil output from US shale fields, Canadian tar sands and Brazil’s ultra deep waters that boomed when oil averaged above $100 a barrel.
This week Saudi Arabia sought to reinstall a sense of unity among some members after a bruising two-year battle for market share.
While no formal agreement on production was reached, this week’s meeting in Vienna was notably more amicable than the previous two gatherings.
Opec successfully appointed a new secretary-general, Nigeria’s Mohammed Barkindo, a relatively minor ministerial procedure that could not be agreed on previously.
Bill Farren-Price, head of Petroleum Policy Intelligence, said: “Now the market is starting to rebalance, the Saudis are moving to reinstate control. In many ways they are pushing at an open door now supply is falling and demand is rising strongly. They can say that their strategy has been a success.”
Delegates leaving the meeting emphasised that the recovery from a 13-year low below $30 a barrel in January had reduced the urgency for co-ordinated action and showed that supply and demand were coming into balance. “Overall [the meeting] was either neutral or slightly positive,” said Natixis analyst Abhishek Deshpande. “This was about re-establishing a sense of unity.”
Ministerial comments ahead of the group’s twice-annual meeting had set the stage for a showdown between Saudi Arabia and its regional rival Iran, which has been raising its output rapidly since January after being constrained for years under western sanctions.
Although talk from Gulf producers this week signalled that Saudi Arabia and its allies may seek to discuss the reimposition of an output ceiling, Iran said that any target without quotas would be a fruitless endeavour.
Bijan Zanganeh, Iran’s oil minister, said that the country had every intention of raising production further.
“Without country quotas, Opec cannot control anything,” he said before the meeting.
He later said that he was largely happy with the outcome as no other member indicated they were planning sharp production increases.
Dewardric McNeal, a former Obama administration official who runs Longview Global, a consultancy, said: “Despite the deep mistrust and proxy battles raging between Saudi Arabia and Iran, we are watching to see if they can rise above their differences for the sake of Opec and its members.”
Mr Falih said that he hoped the market would eventually “equalise somewhere moderate”, meaning a level that would prompt enough investment to meet rising demand but “too much investment to the point that we create an oversupply and a glut again”.
The group will become a 14-member organisation in July when Gabon is admitted, the cartel said. Outgoing secretary-general Abdalla El Badri was keen to play down suggestions that the rise of shale and other Opec supplies meant the group was effectively dead.
