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OPEC Ends Meeting With No Changes in Oil Production OPEC Ends Meeting With No Changes in Oil Production
(35 minutes later)
VIENNA — OPEC countries decided at their meeting here on Thursday to make no change in their levels of oil production, citing the recent rise in prices and signs that the global petroleum glut might be easing.VIENNA — OPEC countries decided at their meeting here on Thursday to make no change in their levels of oil production, citing the recent rise in prices and signs that the global petroleum glut might be easing.
But the markets apparently took the news as a sign that the 13-nation Organization of the Petroleum Exporting Countries remains unable to coordinate its policies. The price of West Texas Intermediate oil, a global benchmark, was down more than 1.8 percent on the news, to about $48 a barrel. It had recently been trading above $50.But the markets apparently took the news as a sign that the 13-nation Organization of the Petroleum Exporting Countries remains unable to coordinate its policies. The price of West Texas Intermediate oil, a global benchmark, was down more than 1.8 percent on the news, to about $48 a barrel. It had recently been trading above $50.
The group did select a new secretary general, Mohammed Barkindo, a Nigerian oil official. He replaces Abdalla Salem el-Badri of Libya, who had long served in an interim capacity.The group did select a new secretary general, Mohammed Barkindo, a Nigerian oil official. He replaces Abdalla Salem el-Badri of Libya, who had long served in an interim capacity.
“We chose a new secretary general — that’s pretty good,” the Venezuelan oil minister, Eulogio Del Pino, said sarcastically. Venezuela is among the OPEC members urging the group to freeze or lower production levels, to shore up prices.“We chose a new secretary general — that’s pretty good,” the Venezuelan oil minister, Eulogio Del Pino, said sarcastically. Venezuela is among the OPEC members urging the group to freeze or lower production levels, to shore up prices.
But analysts have said a production ceiling alone would be of limited value in regulating OPEC output and setting market prices. That is because many of the biggest producers, including Saudi Arabia, are already pumping near top capacity.But analysts have said a production ceiling alone would be of limited value in regulating OPEC output and setting market prices. That is because many of the biggest producers, including Saudi Arabia, are already pumping near top capacity.
And unless individual countries are assigned production quotas, members might have little incentive to alter their output.And unless individual countries are assigned production quotas, members might have little incentive to alter their output.
“Without a quota system, there is no way to assess each country’s contribution to the total” said Bill Farren-Price, chief of Petroleum Policy Intelligence, a market research firm based in Winchester, England. “It is, therefore, pretty meaningless.”“Without a quota system, there is no way to assess each country’s contribution to the total” said Bill Farren-Price, chief of Petroleum Policy Intelligence, a market research firm based in Winchester, England. “It is, therefore, pretty meaningless.”
The apparent lack of resolve came as OPEC’s de facto leader, Saudi Arabia, has been trying to urge the group to restore its former market discipline. Under their new oil minister, Khalid al-Falih, the Saudis appeared at the meeting to be trying to mend fences with fellow OPEC members.The apparent lack of resolve came as OPEC’s de facto leader, Saudi Arabia, has been trying to urge the group to restore its former market discipline. Under their new oil minister, Khalid al-Falih, the Saudis appeared at the meeting to be trying to mend fences with fellow OPEC members.
Mr. Falih arrived here on Monday, before the OPEC gathering got underway, and had been meeting at his hotel with officials from other members of the cartel. Those include Mr. Del Pino, the Venezuelan oil minister.Mr. Falih arrived here on Monday, before the OPEC gathering got underway, and had been meeting at his hotel with officials from other members of the cartel. Those include Mr. Del Pino, the Venezuelan oil minister.
Mr. Falih has apparently been trying to calm members’ fears about recent comments by Saudi Arabia’s deputy crown prince, Mohammed bin Salman. The prince had raised the specter of a further oil glut by saying the kingdom could easily raise production.Mr. Falih has apparently been trying to calm members’ fears about recent comments by Saudi Arabia’s deputy crown prince, Mohammed bin Salman. The prince had raised the specter of a further oil glut by saying the kingdom could easily raise production.
To the broader global audience, Mr. Falih’s goal appeared to be to restore at least some credibility to OPEC. The group had seemed to stumble into disarray at an April meeting in Doha, Qatar, when it tried but failed to reach a deal with major players outside the organization, including Russia, to freeze production.To the broader global audience, Mr. Falih’s goal appeared to be to restore at least some credibility to OPEC. The group had seemed to stumble into disarray at an April meeting in Doha, Qatar, when it tried but failed to reach a deal with major players outside the organization, including Russia, to freeze production.
Mr. Naimi had initially supported such a freeze. But he was told by his bosses in Riyadh not to pursue the deal because Iran — a fellow OPEC member and a bitter geopolitical rival of the Saudis — had refused to participate. Ali bin Ibrahim al-Naimi, the previous Saudi oil minister, had initially supported such a freeze. But he was told by his bosses in Riyadh not to pursue the deal because Iran — a fellow OPEC member and a bitter geopolitical rival of the Saudis — had refused to participate.
As a result, the Saudis now sometimes appear to have conflicting objectives. They seem no longer to want the role of central banker to the oil markets, balancing supply and demand. But despite the recent rally in oil prices, they were apparently shocked by the consequences of their refusal to impose market discipline, which led to crude’s dropping below $30 a barrel in January.As a result, the Saudis now sometimes appear to have conflicting objectives. They seem no longer to want the role of central banker to the oil markets, balancing supply and demand. But despite the recent rally in oil prices, they were apparently shocked by the consequences of their refusal to impose market discipline, which led to crude’s dropping below $30 a barrel in January.
“The Saudis are optimizing for a world in which prices go through big swings, ” said Robert McNally, a former White House energy adviser who is now the president of Rapidan Group, a Maryland-based market research firm, “Yet they want to retain some sense of stability provided by OPEC.”“The Saudis are optimizing for a world in which prices go through big swings, ” said Robert McNally, a former White House energy adviser who is now the president of Rapidan Group, a Maryland-based market research firm, “Yet they want to retain some sense of stability provided by OPEC.”
Mr. McNally said those two objectives were “completely contradictory” and that “boom and bust cycles” were the likely outcome “when there is no one balancing the markets.”Mr. McNally said those two objectives were “completely contradictory” and that “boom and bust cycles” were the likely outcome “when there is no one balancing the markets.”
Since late 2014, the Saudis have adopted a strategy of leaving prices to the market, to the dismay of some other OPEC members. The Saudis, who have very low production costs, calculated that lower prices would squeeze out some of their higher-cost rivals including shale oil producers in the United States.Since late 2014, the Saudis have adopted a strategy of leaving prices to the market, to the dismay of some other OPEC members. The Saudis, who have very low production costs, calculated that lower prices would squeeze out some of their higher-cost rivals including shale oil producers in the United States.
In a sense, the strategy has worked. Oil companies have slashed or postponed hundreds of billions of dollars of investment in new oil and gas projects, and shale oil production in the United States is beginning to decline.In a sense, the strategy has worked. Oil companies have slashed or postponed hundreds of billions of dollars of investment in new oil and gas projects, and shale oil production in the United States is beginning to decline.
“It has taken longer and involved a lower price than they would have thought, but it is working,” said Jason Bordoff, a former White House energy adviser who is now director of the Center on Global Energy Policy at Columbia University.“It has taken longer and involved a lower price than they would have thought, but it is working,” said Jason Bordoff, a former White House energy adviser who is now director of the Center on Global Energy Policy at Columbia University.