Analysis: OPEC grinds down over politics
The Organization of the Petroleum Exporting Countries normally likes numbers to run the show, but this week numbers took a decided back seat to politics as the group failed to reach a consensus over any output increase.
OGJ Oil Diplomacy Editor
LOS ANGELES, June 8 -- The Organization of the Petroleum Exporting Countries normally likes numbers to run the show, but this week numbers took a decided back seat to politics as the group failed to reach a consensus over any output increase.
OPEC Sec.-Gen. Abdullah El-Badri put a diplomatic spin on the failed meeting saying, "Unfortunately we are unable to reach a consensus to reduce or raise production.”
El-Badri said failure to reach agreement among the 12 member states came down to discrepancies in their official data about oil demand and supply.
“Everyone has his own data and information,” El-Badri said. “Some of them, they have different numbers…we are unable to consolidate our numbers together so we can agree to increase or reduce our production.”
That, again, is understandable diplomatic speak, but data produced by OPEC’s own secretariat suggests that demands on the group’s oil production will rise by 2.1 million b/d between the second and third quarters.
But some OPEC members clearly disregarded the group’s own numbers.
A grittier summary
A grittier summary of the day’s outing came from Saudi Arabia’s normally affable oil minister, Ali I. Al-Naimi, who called the occasion “one of the worst meetings we have ever had.”
Saudi Arabia, OPEC’s largest producer, together with Kuwait, Qatar, and the UAE, proposed that the group raise its actual output by 1.5 million b/d to 30.3 million b/d, Al-Naimi said.
The six that opposed an increase were Libya, Angola, Ecuador, Algeria, Iran, and Venezuela, Al-Naimi said. No one mentioned the position of Nigeria, the 12th member of the group.
Perhaps the best indication of the meeting going off the rails came the day before when Angolan Oil Minister Jose Maria Botelho de Vasconcelos introduced the idea of geopolitics entering the discussion.
“People are talking about an increase,” de Vasconcelos told reporters in Vienna. But he went on to say, “We have to wait and see. My feeling is there is no need. The market is supplied at this time. There are some geopolitical problems.”
Perhaps the most important geopolitical development on the oil market this year has been the loss of Libyan production, which totaled 1.58 million b/d in January.
But El-Badri, a former deputy prime minister in the government of Libya’s now embattled leader Moammar Gadhafi, said the OPEC ministers had not even mentioned the matter. “We did not discuss Libya’s situation,” he said.
Possibly not, but that situation assuredly had to have been on the minds of the Libyan delegation which worked against the proposal put forth by the Gulf Arabs.
Certainly, the Libyans would have a hard time agreeing with a proposal that had anything to do with Qatar, which has publicly backed the forces opposed to Gadhafi’s regime.
Of course, Hugo Chavez’s Venezuela is always ready to go against anything that looks like support for the US—as is Ecuador. Then, again, there’s Iran with its own special ax to grind.
Now subject to sanctions by the United Nations, the US, and the European Union, the Iranians are hardly likely to side with a proposal put forth by their rivals across the gulf—especially given the recent arms agreement formed between the US and Saudi Arabia.
Iran’s acting oil minister, Mohammed Aliabadi, who chaired the meeting, said the only decision made by the group was to meet again in December to reassess the market.
More than misfortune
Alluding to the apparent divisions within OPEC, especially between his own country and Saudi Arabia, Aliabadi added, “But this decision [over output] was unfortunately not welcomed by certain members.”
Unfortunate? There’s that word again. But there was more than misfortune operating in Vienna today.
Analysts noted that while there were opposing views on whether markets required more crude, the backdrop to the disagreement revolved more around political tensions in the Middle East and North Africa, along with differences of opinion on how to respond to consumer demands.
"One factor is a diverging market view. Another is politics," said analyst Samuel Ciszuk at IHS Global Insight. "At times of heated politics/ideological debate, Saudi struggled to dominate as much as it could have given its size vis-a-vis others in OPEC.”
Still, when it comes right down to additional oil, the Saudis are ready to produce it whether other OPEC members agree or not—a point stressed by Al-Naimi: “Saudi Arabia is committed to supplying the needs of the market regardless of the disagreement.”
Even that decision leaves OPEC looking weak, according to one observer. "It is absolutely amazing," said Alirio Parra, Venezuela's former OPEC president. "This is not market leadership.”
For weeks, everyone suspected this would be a discordant meeting of the world’s leading club of oil producers. But whatever it was, today’s meeting was certainly not OPEC by the numbers.
Contact Eric Watkins at email@example.com.