OPEC (The Organization of the Petroleum Exporting Countries) will likely decide to roll over oil production at its meeting on Friday, sources said, with Saudi Arabia telling other members it has no intention of floating a proposal for curbing output.
Three OPEC delegates and sources said the group would maintain output without changing the current ceiling of 30 million barrels per day (bpd), sticking with its plan to defend market share rather than shore up prices at near seven-year lows.
Angolan Oil Minister Jose Botelho de Vasconcelos, when asked on Friday whether OPEC would maintain policy, replied: “I think so, I think so. But it is better to wait because we will analyse the situation.” The group will likely postpone a technical increase in its ceiling to accommodate returning member Indonesia until next year, although one source said it may make a technical adjustment in the formal rate in order to match current output, which is running some 1.5 million bpd higher.
They said they saw little chance of Saudi Arabia making a formal proposal for OPEC output cuts, contingent on joint action from non-OPEC, as reported by an industry newsletter.
At an informal meeting of ministers on Thursday, Saudi Arabia’s Ali al-Naimi said that the kingdom “is not proposing a 1 million bpd cut,” one source briefed by an OPEC minister said.
“He said Saudi Arabia will keep firm in its strategy of opposing any cut that is not previously coordinated with non-OPEC, obviously meaning Russia.” Energy Intelligence had reported on Thursday Saudi Arabia was prepared to support a cut of 1 million bpd by OPEC if Iraq agreed to freeze output, Iran contributed and non OPEC members joined the cuts too. A Saudi oil source told Reuters the report was “baseless” but declined to elaborate.
Russia and Iraq quickly reacted by saying they had no plans to curtail output and Iran said it was reserved to steeply ramp up output as soon as Western sanctions on the country were lifted because other OPEC members have been benefiting too long from its artificially curtailed supply.
“No action will be decided as there is a huge disagreement among members, even bigger now as oversupply is no longer mainly coming from Gulf delegates, but from Iran, who is willing to fight to recover its market share,” the source briefed by one of the OPEC ministers said.
While the outcome seems clear, surprises are always possible.
One possible scenario is for OPEC to recognise the fact that members are pumping well in excess of the formal ceiling, raising the group’s collective quota from 30 million bpd to 31.5 million bpd, in line with the current volumes.
OPEC abandoned production quotas several years ago and most members have been producing as much as they want.
Russian energy minister Alexander Novak said on Thursday OPEC should bring its production levels close to reality.
Bringing the ceiling in line with real production could help bridge the gap in views between OPEC and non OPEC. The two had last cooperated almost 15 years ago to cut output and prop up the prices following the 1998 financial crisis.
