EMEA News
No Freeze and Saudi Arabia Losing The Price War Are the Immediate Fallouts of Naimi Dismissal: Iran
The prospect of an oil output freeze along with any accord amongst key Organization of the Petroleum Exporting Countries (OPEC) members has become increasingly dim with the dismissal of Ali al-Naimi as Saudi Arabia's oil minister, comments by various key figures would suggest.
With Mohammed bin Salman, the country's deputy crown prince, now firmly in control of energy policy, and a new minister, Khalid al-Falih, expected not to deviate from the prince's hard line on maintaining high crude output, the prospect of Iran discussing limiting its output at the upcoming OPEC meeting in Vienna on June 2 – which it said it might do now that it has returned to its pre-sanctions output level – seems faint.
Indeed, in a story he wrote for the Iranian oil ministry magazine Iran Petroleum, Akbar Nematollahi, the head of the ministry's public relations, said increased politicization in OPEC – which the Islamic Republic disapproves of - would make any agreement unlikely for now.
He also stated that "Saudi Arabia will be the main loser in the price war", adding that the Saudis have "destroyed" $100 oil.
In stressing that conflicts in Syria and Yemen have to be resolved first, Amir Hossein Zamaninia, deputy oil minister for international affairs for Iran, told The Wall Street Journal that "In the Southern Persian Gulf, oil is becoming a political commodity, more than an economic commodity; OPEC is in a difficult situation."
Meanwhile, Naimi's dismissal has caused observers to wonder about its impact on OPEC and rival Iran; John Hall, chairman of Alfa Energy, says, "Naimi knows OPEC and OPEC knows him and any change will present another problem for OPEC ministers.
"To understand the new direction that will undoubtedly arise from the new leadership of the Saudi ministry will take time."
Jamie Webster, an independent energy analyst, says, "The big and unanticipated shift is that Mohammed bin Salman is setting the policy; however, the policy set by Naimi, to not cut in the face of structural oversupply, will likely remain."
Robin Mills, CEO of Qamar Energy, summarizes the uncertainty of the near future by stating, "If there is a chance of a renewed 'freeze' deal, I think they and most other members will be delighted to take it; the main issue is, given some encouraging noises from Iran, whether the deputy crown prince and Falih will be open to a freeze deal involving Iran later in the year."
According to the Wall Street Journal, OPEC officials say that Bijan Zanganeh, oil minister for Iran, could see his profile grow in Naimi's absence – but what this would mean for the cartel was not discussed.
Naimi, who was the Saudis' oil minister for over 20 years and known as the most powerful man in oil, was ousted from his position by a royal decree over the weekend.
For bunker buyers, the current uncertainty will almost certainly translate into continued volatility, and adding to the difficulties in predicting price direction of late has been the fact that the markets have been driven upward more by speculation than fundamentals.
Over the last three months, that has pushed up the average IFO380 bunker price across 20 key ports that represent a vast majority of global bunker volume (Ship & Bunker's Global 20 Ports Average) by some 32 percent. to $219.50 per metric tonne (pmt) as of Monday.
MGO in those ports has risen 15 percent in that time, to $445.50 pmt on Monday.
