"OPEC is Dead" Says Official After Riyadh's Major Shift in Thinking Widens Cartel's Cracks

OPEC's viability is being questioned by an increasing number of observers

A fundamental shift in the way Saudi Arabia perceives the oil market has caused an Organization of the Petroleum Exporting Countries (OPEC) official to declare that the cartel "is dead."

The declaration, reported to Reuters by two sources who were present or briefed during OPEC's Vienna meeting, was voiced by a delegate from a non-Gulf Arab country and directed at a Saudi representative as they argued over whether OPEC should keep targeting prices.

Riyadh believes that targeting prices is now pointless because the weak global market is not a temporary trend, according to sources.

Mohammed al-Madi, a Saudi governor, told his counterparts at the meeting, "OPEC should recognize the fact that the market has gone through a structural change, as is evident by the market becoming more competitive rather than monopolistic.

"The market has evolved since the 2010-2014 period of high prices and the challenge for OPEC now, as well as for non-OPEC (producers), is to come to grips with recent market developments."

Reuters calls dispensing with price targets "a massive change in Saudi thinking" and credits 31-year-old deputy crown prince Mohammed bin Salman, who became the decision maker of the country's energy and economic policies last year, for the new mindset.

While it's hardly the first time the cartel's demise has been predicted, the delegate's outburst follows Saudi Arabia and Iran ruining a highly-touted deal last month to freeze crude output, and a botched December meeting in Vienna whose internal squabbling and subsequent declaration that the cartel was as strong as ever drew laughter from reporters.

OPEC's viability is also being questioned by an increasing number of observers, one of them being Paolo Scaroni, ex-CEO of Italy's energy giant Eni, who last month was quoted as saying that "OPEC is an organization which is not capable anymore of managing oil prices all over the world ... [it] is producing only 35 million barrels a day, out of the world consumption in excess of 90 million barrels a day."

Moreover, key OPEC members are facing ruin, with RBC Capital Markets warning that the oil-driven economies of Algeria, Iraq, Libya, Nigeria, and Venezuela will collapse if the oil market doesn't soon stabilize.

Perhaps most significantly, Ali bin Ibrahim Al-Naimi, Saudi Arabia's oil minister for over 20 years, on Saturday was removed from his position by a royal decree.