Saudi, Iran raises fresh dust over OPEC’s oil output targets
OPEC is set for another showdown between rivals Saudi Arabia and Iran at a meeting on Thursday, with Riyadh trying to revive coordinated action and set a formal oil output target but Tehran rejecting the idea.
Tensions between the Sunni-led kingdom and the Shia Islamic Republic have been the highlights of several previous OPEC meetings, including in December 2015 when the group failed to agree on a formal output target for the first time in years.
Several OPEC sources said Saudi Arabia and its Gulf allies would propose to set a new collective ceiling in an attempt to repair OPEC’s waning importance and end a market-share battle that has sapped prices and cut investment.
“The Gulf Cooperation Council is looking for coordinated action at the meeting,” a senior OPEC source said on Wednesday, referring to a group combining OPEC’s biggest producer Saudi Arabia and its Gulf allies Qatar, Kuwait and the United Arab Emirates.
Any agreement between Riyadh and Tehran would be seen as a big surprise by the market, which in the past two years has grown increasingly used to clashes between the political foes as they fight proxy wars in Syria and Yemen.
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 the Organization of the Petroleum Exporting Countries to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.
Tehran argues it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over Iran’s nuclear programme.
Iranian Oil Minister Bijan Zanganeh said Tehran would not support any new collective output ceiling and wanted the debate to focus on individual country production quotas.
“An output ceiling has no benefit to us,” Zanganeh told reporters upon arriving in Vienna late on Wednesday.
New Saudi Energy Minister Khalid al-Falih was the first OPEC minister to arrive in Vienna this week, signalling he takes the organisation seriously despite fears among fellow members that Riyadh is no longer keen to have OPEC set output.
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.
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.
UAE Oil Minister Suhail bin Mohammed al-Mazroui said low oil prices were pushing all countries to limit production, whether they say so publicly or not.
Until December 2015, OPEC had a ceiling of 30 million barrels per day (bpd) – in place since December 2011, although it effectively abandoned individual production quotas years ago.
OPEC currently produces around 32.5 million bpd. Any ceiling below that number would represent an effective cut.
Carsten Fritsch, a Commerzbank analyst, said even a ceiling of 33 million bpd would be bullish for markets given that Nigerian output was down 0.8 million bpd and Iran planned to add another 0.5 million bpd.
OPEC is due to start its meeting at 0800 GMT, with a closed session starting at 1000 GMT and a news conference at 1400 GMT, according to a preliminary agenda.