With The OPEC Meeting Now In Session, Here Are The Latest Updates
By Tyler Durden
With the OPEC meeting having started a little under two hours ago, it appears that the premature optimism raised yesterday about yet another imminent production freeze deal may have been mostly hot air. Indeed, yesterday’s bounceback in oil was driven by the various reports of a potential reintroduction of a ceiling on production after the previous ceiling was scrapped in December. The WSJ ran a story suggesting that the willingness is shared by Saudi Arabia as well as smaller producers in Nigeria, Qatar, Algeria and Venezuela. However, like in Doha, Iran appears to be against a wholesale supply cap after its oil minister said late on Wednesday he’d prefer individual national output quotas rather than an overall production ceiling, and added that he doubted a deal is possible. Meanwhile, Saudi Arabia is willing to live with either outcome.
This is a recap of what oil ministers said just before they entered a close door session which is expected to conclude at 10 am Eastern:
- Saudi Arabia’s minister said OPEC’s current strategy was working and that group should reestablish a production ceiling “when necessary”; click here for summary
- Iran says an OPEC output ceiling without country quotas means nothing; Iran aims to pump 4.8m b/d in 5 yrs
- Kuwait doesn’t think a ceiling is necessary
- Iraq says OPEC will consider 32.4m b/d ceiling, which is same as April’s output level, according to secondary sources
Like in Doha, while Iran will be the scapegoat for any lack of deal, the question is what Saudi Arabi’s strategy is. For the answer, we go to Saudi Arabia’s new Energy Minister Khalid Al-Falih who spoke to reporters at start of OPEC’s ministerial conference in Vienna. This is what he said via BBG:
On OPEC strategy, market balancing:
- Sees supply and demand coming into balance
- Mkt is not oversupplied; just inventory that needs to be absorbed
- We will be gentle with our approach
- Demand is robust; non-OPEC supply declining
- Everybody is satisfied w/ mkt
- OPEC strategy is succeeding
- Saudi Arabia would welcome non-OPEC coordination
- When supply exceeds demand it isn’t sustainable
- Saudi Arabia doesn’t want over-investment in oil supply
On prices:
- Market will rebalance at a higher oil price than today
- Saudis could withstand a longer period of lower prices
- Oil supply disruptions are supporting mkt recovery
- Nobody can know what is equilibrium price of oil mkt
- We think prices are on the way up
- Saudi Arabia is concerned about effect of low prices
On production ceiling:
- Saudi doesn’t want to see reduction in OPEC output
- OPEC should go back to production ceiling when necessary
On Saudi capacity:
- Saudi Arabia oil production capacity is 12.5m b/d
- Saudi will respond to oil mkt if there’s a shortage
- Will have enough spare capacity to meet any demand
* * *
As noted above, while Saudi Arabia remains the most important OPEC player, the market’s focus will be on what Iran does, and as Bloomberg reports, the middle-eastern nation resisted overtures from OPEC’s largest producer Saudi Arabia to restore a production target scrapped at the group’s last meeting in December.
“I don’t agree with an overall output ceiling for OPEC,” Iranian Oil Minister Bijan Namdar Zanganeh said Thursday, before …read more
Source: With The OPEC Meeting Now In Session, Here Are The Latest Updates
