OPEC to keep oil flowing as price recovers

OPEC is expected Thursday to keep the oil gushing as a modest recovery in the crude price eases pressure on the divided cartel to cut or freeze output.

Traditionally the Organization of the Petroleum Exporting Countries, which pumps around a third of the world's oil, has cut production to boost prices.

But in the most recent drop, which has seen oil tumble from over $100 in 2014 to close to $25 in January, OPEC -- driven by kingpin Saudi Arabia -- has changed tack.

Experts say the 13-nation group has kept the oil flowing in order to squeeze competitors -- particularly US shale oil producers -- and retain market share.

After some time, the tactic now appears to be working. Suhail al-Mazrouei, United Arab Emirates oil minister, described 2016 as "the year of correction" as he arrived in Vienna ahead of the OPEC meeting.

Non-OPEC output is falling and prices last week briefly rose above $50 for the first time in six months, although they softened on Wednesday on the eve of the talks.

US benchmark West Texas Intermediate for delivery in July fell nine cents to $49.01 a barrel on the New York Mercantile Exchange.
In London, Brent North Sea crude for August delivery, in its first day of trade as the European benchmark, was at $49.72 a barrel, down 17 cents from Tuesday's settlement.

Animosity between Saudi Arabia and Iran -- bitter regional OPEC rivals with frayed ties -- means that any agreement to cut output is highly unlikely.

Since Iran's 2015 nuclear deal entered into force in January and sanctions were lifted, Tehran has aggressively ramped up output, and is unwilling to stop now.

"A doubling of exports of Iranian oil has had no negative impact on the market and has been absorbed well," Iranian Oil Minister Bijan Zanganeh said Wednesday.

Iran exported just over two million barrels of oil every day last month, he said, predicting that would soon double as the country is currently producing some 3.8 million barrels a day.

- 'Don't care about prices' -

Iran stayed away from a disastrous meeting in Doha on April 4 between OPEC and non-OPEC members including Russia that failed to agree a possible coordinated output freeze.

Saudi Arabia -- and in particular the powerful young Deputy Crown Prince Mohammed bin Salman who is seeking to revamp the country's economy -- is now thought to have gone off putting a cap on output.

After the Doha debacle, the 30-year-old prince replaced veteran oil minister Ali al-Naimi with Khaled al-Falih, who is thought to be, if anything, less amenable to a cut.

This conflict between the Saudis and the Iranians could re-emerge if oil prices dip again, however, for example on the back of a stronger US dollar.

This worries poorer OPEC members, not least Venezuela, where the economy is racked by severe food shortages and inflation projected to hit 700 percent in 2016.

Venezuela's oil minister said in Vienna that the recent recovery has been driven not by OPEC's strategy but by one-off factors like wildfires in Canada and a strike in Kuwait.

"It's not the situation of the market, it's some circumstances," Eulogio del Pino said. "When those circumstances are removed, what is going to happen?" 

This is unlikely to sway the Saudis, however.

"We don't care about oil prices -- $30 or $70, they are all the same to us," Prince Salman said in an interview with Bloomberg published in April.

One thing which could perhaps smooth the waters would be the appointment of a new OPEC secretary general to replace the Libyan Abdalla El-Badri.

Candidates to succeed him include Ali Rodriguez Araque of Venezuela, Nigeria's Mohammed Barkindo and Mahendra Siregar of Indonesia, reports said.

"The main item on our agenda at this meeting is choosing the new secretary general for OPEC," Zanganeh said. 

Source :AFP