Saudi Arabia "Killed OPEC and Buried It", says OPEC Source

There is a growing chorus of critics who question the cartel's fundamental reason for being.

The latest unflattering description of the Organization for the Petroleum Exporting Countries (OPEC), which of late has been laughed at by the press and called comatose by analysts, comes from a senior non-Gulf OPEC member, who told media that "Saudi Arabia killed OPEC and buried it."

The comment was spurred by the activities of Khalid al-Falih, the new energy minister for the Saudis, who since his appointment a few weeks ago has toured six state firms, met the South Korean premier, the Canadian foreign minister and Gulf industry ministers, and opened a gas turbine plant – which to fellow members implies he doesn't have time for the cartel.

The source went on to remark, "In OPEC, they go for (including) Indonesia and Gabon to convert OPEC to a forum", a reference to OPEC's Saudi-backed decision to include minor producers in what is said to have become more of a talking rather than output-setting process.

Reuters speculates that the Saudis' mindset may be due to the rise of U.S. shale producers, which convinced them that the era of fast oil growth is ending – and caused them to initiate their strategy of fighting for market share.

It's unclear whether the source was lamenting OPEC's decline or just stating opinion, but other members solicited for comment – such as an OPEC delegate from one of the main producing countries in the Middle East – noted that "some members want OPEC to play a more significant role in managing the market."

Reuters concludes that "it's hard to see OPEC regaining its grip" and reiterates the view of many analysts that next week's meeting in Vienna will not consist of any meaningful discussion of a freeze policy, "which OPEC lacks anyway as its members pump at will."

Meanwhile, Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA, will be scrutinizing al-Falih's stance at the Vienna summit, explaining that the recent change in Saudi leadership – and the plans for further production capacity and market share that go along with it - means the meeting will still be "pivotal for the cartel and its future."

Earlier this week, Eugen Weinberg, head of commodities research at Commerzbank AG, addressed OPEC's growing propensity for letting members produce as much as they want with no coordination by remarking, "Is OPEC dead or just in a coma?"