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Page added on June 2, 2016
Saudis Pledge Not To Shock Oil Market As OPEC Clash Looms
Saudi Arabia promised on Thursday not to flood the oil market with extra barrels as OPEC headed into a heated debate about production policy, with Iran insisting on the right to raise output steeply.
Tensions between the Sunni-led kingdom and the Shi’ite 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.
Failure to reach any deal would revive market fears that OPEC’s largest producer Saudi Arabia, already pumping near record highs, may raise production further to punish rivals and gain additional market share.
“We will be very gentle in our approach and make sure we don’t shock the market in any way,” new Saudi Energy Minister Khalid al-Falih told reporters ahead of the meeting.
“We are going to be responsible but we are also going to be responsive,” Falih said when asked whether Saudi Arabia could flood the market with new oil.
Answering a question on whether Riyadh would propose setting a new collective output ceiling, he said: “We will do that when necessary.” He added that he would listen to anything Iran brings to the table.
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.
“Without country quotas, OPEC cannot control anything,” Zanganeh told reporters. He insisted Tehran deserved a quota – based on historic output levels – of 14.5 percent of OPEC’s overall production.
OPEC is pumping 32.5 million barrels per day (bpd), which would give Iran a quota of 4.7 million bpd – well above its current output of 3.8 million, according to Tehran’s estimates, and 3.5 million, based on market estimates.
Zanganeh said he supported a candidate from Nigeria for the post of OPEC secretary-general, which could emerge as a rare compromise within the organisation if Riyadh also backs the appointment.
COUNTRY QUOTAS
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.
“There could be shorter-term situations in which, in our view, OPEC might intervene and yet other situations – such as long-term growth of marginal barrels – in which case it should not,” Falih told Argus Media ahead of the meeting.
At its previous meeting in December 2015, OPEC effectively allowed 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 bpd – in place since December 2011, although it effectively abandoned individual production quotas years ago.
Any ceiling below 32.5 million bpd would represent an effective cut.
By 1130 GMT, ministers had been meeting for 2-1/2 hours in a closed session.
12 Comments on "Saudis Pledge Not To Shock Oil Market As OPEC Clash Looms"
makati1 on Thu, 2nd Jun 2016 7:25 pm
The KSA no longer controls oil prices. RIGPORN
Survivalist on Thu, 2nd Jun 2016 9:00 pm
KSA is going to implode within a few years.
https://youtu.be/hh8isVX3H9w
Boat on Thu, 2nd Jun 2016 9:04 pm
Nigerian rebels have cut production 700,000 bpd. After quotas have been set OPEC should hire these rebels for enforcement.
Survivalist on Thu, 2nd Jun 2016 9:50 pm
This video is a bit older but it’s still good. The pillars of the House of Saud are clearly beginning to crack. It wouldn’t surprise me one bit if Iran was conducting false flag operations to destabilize the House of Saud by turning the clans against one another.
https://youtu.be/KjUMB8taEYY
Anonymous on Fri, 3rd Jun 2016 2:01 am
Are you that retarded Surv? or just american? ‘Iran’ has no need to carry out any ‘false flags’ against the sauds. Internal dissension is the sauds #1 priority, and threat, and always has been. Iran has no plans to engage the sauds, or your made-up-plans to turn the ‘clans’ against one another. Iran is the one being targeted by false flags, like the clumsy amero-zionist plan to try to implicate Iran for trying to assassinate that saud ambassador.
The medieval house of Sauds only real enemy, is their own oppressed population. Iran for its part, would be quite happy to get along with the sauds on normal terms, even as oppressive as they are. Its the Jewnited States that has created this whole Saud-v-Iran thing….
rockman on Fri, 3rd Jun 2016 8:45 am
As detailed many times before the KSA (and all other oil producers) has never been able to directly set oil prices. The only control is how much they produce. At least the silly reports that the KSA is producing so much in order to hurt US shale producers has dropped considerably now that their revevenue loss is heading towards 100’s of $BILLIONS.
JuanP on Fri, 3rd Jun 2016 8:57 am
What a load of crap! There was no agreement and nothing happened. The Saudis are most likely producing as much as they can just like everybody else. The Iranians will do the same.
I think what will happen is that everyone will continue producing as much as possible like they are doing right now. It’s every man for himself from now on. This is likely the last boom bust cycle for the oil industry. It will be mostly bust from now on. Production is not being replaced with new reserves or even resources. This is game over for economic growth and the current financial system. I think oil production declines are inevitable for the foreseeable future and the rest of our lives.
This sucker is going down! A new system is needed.
Davy on Fri, 3rd Jun 2016 9:20 am
Well put Juan
Kenz300 on Fri, 3rd Jun 2016 9:21 am
The sooner the world gets off its oil addiction the better………
Electric cars, bicycles and mass transit are the future…..fossil fuel ICE cars are the past…………..
Think teen agers vs your grand father…………………. cell phones vs land lines…….
NO EMISSIONS……..climate change is real………
Save money……no stopping at gas stations…..no oil changes……..less overall maintenance……
rockman on Fri, 3rd Jun 2016 10:42 am
I agree Juan: a new system where the US govt sets the price of oil (domestic and imported) at $90/bbl. That would boost the incentive to ramp up the alts as well as increase drilling. And the minor coincidental increase in revenue for oil patch, foreign govt supporting terrorists and increase royalty income for the US govt. Oh…and make the Rockman a sh*t load of money. LOL
Outcast_Searcher on Fri, 3rd Jun 2016 4:52 pm
Oil is a volatile commodity. The price is subject to shocks from unexpected events.
Does anyone doubt that the oil price would shoot up if Iran suddenly blocked the Strait of Hormuz?
Or that prices would plunge if there were credible information pointing to OPEC producing, say, 10 million more BPD within the next few months?
Since we all know oil is volatile and will very likely stay volatile for years to come, rational countries and individuals should plan ahead and take appropriate steps to hedge themselves against such volatility.
The biggest problem of course, is that the worlds “rational” and “plan ahead” apply to far too people or countries.
Outcast_Searcher on Fri, 3rd Jun 2016 4:54 pm
Previous post, last sentence should have ended “apply to far too few people or countries”. (I hate the lack of an edit function for these posts).