EMEA News
Brent Settles Above $50/bbl, No Output Deal in Vienna, Conciliatory Saudis Promise No Oil Shocks
Despite an unexpected conciliatory tone set by Saudi Arabia and its Gulf allies, the Vienna meeting of the Organization of the Petroleum Exporting Countries (OPEC) today ended with the cartel allowing its 13 members to pump at will for the foreseeable future.
As a result, Brent prices dropped 1.5 percent at $49 per barrel on Thursday but later recovered to settle at $50.04.
Gary Ross, founder of the PIRA consultancy, said OPEC's failure to enact any change of strategy demonstrates that political differences have severely compromised its effectiveness, and he added that "It is bearish short-term for oil prices; but what is also important is that Saudis are not planning to flood the market."
He is referring to Khalid al-Falih, newly appointed energy minister for the Saudis, who tried to assuage fears that the failed meeting would cause his kingdom to raise production even further than its near record high numbers by telling reporters, "We will be very gentle in our approach and make sure we don't shock the market in any way.
"There is no reason to expect that Saudi Arabia is going to go on a flooding campaign."
Tension during the meeting was said to be less acute than in previous summits, with Iran minimizing its criticism of Riyadh and OPEC addressing long-standing criticism by appointing Nigeria's Mohammed Barkindo as its new secretary-general.
Still, Bijan Zanganeh, oil minister for Iran, said Tehran would not support an output ceiling and instead called for a focus on individual-country production quotas: "Without country quotas, OPEC cannot control anything," he remarked, adding that his nation deserves a quota of 14.5 percent of OPEC's overall production, or 4.7 million barrels per day, well above its current 3.8 million output
Even though OPEC lived up to analysts' expectations that nothing earth-shattering would happen in Vienna, Amrita Sen, co-founder of Energy Aspects, said the summit "actually restores market confidence that Saudi Arabia is committed to OPEC: this is a success compared to three days ago when people had been expecting Falih to walk out of the OPEC room."
It is unclear what Libya, Algeria, and other members of OPEC's so-called Fragile Five member producers think of the Vienna outcome; they were the focus earlier in the week after a Financial Times analysis showed that $50 oil is exacerbating their dire economic situation because "It is neither high enough to save their faltering economies nor low enough to instigate any collaborative action among the world's biggest oil producers."
