- Mozambique Mining: Communities paralyze Vale operation on Moatize Ii ACTIVITIES OF MINE II DA VALE IN MOATIZE
- Africa Oil & Gas: Nigerian Gas Tanker Explosion Kills At Least 35
- DR Congo: Exim Bank India Finances DRC Solar
- Zambia: Largest Solar Plant Complete
- Tanzania: Cabinet to Start Talks for $30B LNG Project
Back in 2011, when OPEC met to discuss raising oil production to offset the drop in Libya, resulting from the civil war, Saudi Arabia’s Ali al-Naimi called it “one of the worst meetings ever.” That meeting ended without consensus and this is likely to happen again this week, when the cartel meets to discuss another production increase.
The fault line is between Saudi Arabia and Russia, which have both signaled that they are all for a substantial increase in production, of up to 1.5 million bpd, and Iran, Iraq, Libya, and Algeria (to date), which would have a problem raising their production.
The latest remarks from Iran’s Oil Minister are not really encouraging. Bijan Zanganeh said, as quoted by Reuters, that “I don’t believe at this meeting we can reach agreement. OPEC is not the organization to receive instruction from President Trump … OPEC is not part of the Department of Energy of the United States.”
The comment refers to President Trump’s tweets about OPEC artificially pushing prices higher and reports that he personally asked Saudi Arabia’s government to step in and replace soon-to-be-lost Iranian barrels with its own after sanctions kick in.
Zanganeh also said he will be leaving Vienna before OPEC’s meeting with Russia and the other non-member partners in the cut deal. Russia is Iran’s geopolitical ally, but now they are in opposing camps with regard to oil production moves and missing that particular meeting could be a diplomatic move to avoid confrontation.
Russia is the country pushing for the highest increase, of 1.5 million bpd. Energy Minister Alexander Novak said “Oil demand usually grows at the steepest pace in the third quarter … We could face a deficit if we don’t take measures,” echoing widely shared analyst expectations of booming oil demand that they have argued was instrumental in the oil price improvement over the last year or so.
Instrumental as it has been, it is not as robust and unyielding as previously believed. When prices climbed closer to US$80 a barrel, demand growth began to slow down, which for some reason surprised many oil bulls.
This slowdown in demand growth highlighted the fact that the emerging economies that are the biggest drivers behind global oil demand growth are not ready to pay whatever asking price they are offered. They are rather going to bargain for lower prices, which is exactly what India and China did, prompting OPEC to consider an early end to the cuts.
As for the internal fractures within OPEC, it’s also worth noting that two of Saudi Arabia’s Gulf allies—Kuwait and Oman—are also not on board with a quick, major production boost. They seem to be leaning more towards a gradual, and more modest, increase, Reuters reports citing OPEC sources. Indeed, some believe Russia’s 1.5-million-bpd proposal is a tactical move aimed at priming the dissenters for agreement to a more modest increase.
Whether or not this move succeeds—the chance seems to be fifty-fifty right now—OPEC might soon have a bigger problem to deal with. The U.S. Congress is deliberating the No Oil Producing and Exporting Cartels Act, which—if passed—would allow lawsuits against OPEC members for manipulating the market. Need we say that President Trump is an ardent supporter of NOPEC?
By Irina Slav for Oilprice.com