OPEC, Saudis, Struggling for Relevancy in Rapidly-Changing Market?

Eulogio Del Pino wants non-OPEC producers to attend the cartel's June meeting to continue freeze talks.

The question of just how much influence non-Organization of the Petroleum Exporting Countries (OPEC) oil producers have on an output agreement may be answered at the next OPEC conference in Vienna.

That's because Venezuela has invited non-OPEC producers to attend the cartel's June meeting, to continue "dialogue and coordination," according to a letter from Eulogio Del Pino, the country's oil minister, to Mohammed al-Sada, energy minister for Qatar and current OPEC president.

The letter states, "We formally require of your kind support, as President of OPEC Conference, to activate mechanisms for consultations among all OPEC Member Countries."

Del Pino also told Reuters that "we've formally proposed to continue Doha discussions in Vienna" – a clear reference that the deal to freeze output, which was scuttled in Doha due to Saudi Arabia refusing to agree to the proposal unless recalcitrant Iran followed suit, could be a major talking point.

While it's anyone's guess what the outcome of Del Pino's invitation will be or what it could do to rebalance the world market, at least one industry insider believes that despite Saudi sabre-rattling and Iran's commitment to increase oil production, OPEC alone no longer has the international clout it once enjoyed.

Paolo Scaroni, ex-CEO of Italy's energy giant Eni, was quoted by RT's Sophie&Co 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."

However, he added, "OPEC plus Russia makes a difference, because OPEC and Russia make more than 50 percent of the world production; I'm sure that if an agreement would be made between OPEC and Russia, even countries which do not belong to OPEC will follow."

Scaroni also believes the huge continued output of the Saudis and other Gulf countries will come at a huge economic cost – not so much to the west, but to these countries: "Just to give you a number, since prices have been collapsing Saudi Arabia have sold in the market more than $100 billion of securities, bonds and equities in order to finance the deficit of the national budget, and the other countries in the region are doing the same."

This week it was reported that Saudi Arabia broke from its usual practice of selling oil via long-term contracts and made its first sale of spot cargo to Chinese teapot refiner Shandong Chambroad; this caused Citigroup Inc. to state in a report that "Spot sales are about the only way the Kingdom can gain new market share in a world in which chunky buyers are interested in securing incremental purchases via spot rather than term arrangements."

Citigroup added, "It remains to be seen whether in the new oil environment, in an effort to gain greater control over market share and market pricing, the Kingdom will move more aggressively to allow resale of its crude and truly re-establish Saudi Light crude oil as the global benchmark."

In April Ship and Bunker reported that Saudi Arabia's biggest ever economic overhaul is a strong indication that it is bracing to withstand long-term low oil prices.