EMEA News
Analysts: Expect Little Impact From New OPEC Chief As Low Prices Create Further Discord In The "Hibernating" Cartel
Due to circumstances beyond his control, the Organization of the Petroleum Exporting Countries' (OPEC) new secretary-general, Mohammed Sanusi Barkindo of Nigeria, will likely have little impact or influence over a cartel that is deeply divided and in disarray, according to observers.
Specifically, while many of the 14 OPEC members now support Saudi Arabia's strategy to pump oil without restraint in order to crowd out U.S. competition, the resulting glut and attendant low prices have caused economic chaos in producing countries, including the Saudi kingdom – and the situation will only intensify if oil lives up to the expectations of analysts and dips towards the $30 level in the near future.
Miswin Mahesh, oil market analyst at Barclays Capital, told CNBC that Barkindo's new role (which is largely one of resolving disputes as an internal ambassador to the cartel) is "a figurehead position really: he can bring together the administrative parts of the body, but his powers to execute policy are very limited and, sadly, political differences (such as those between Saudi Arabia and Iran) will overrule that, even if he does have good leadership skills."
Richard Mallinson, who leads the analysis of international affairs and energy policy at Energy Aspects, views the appointment as a generally positive step, "but we shouldn't overate the role he will play in terms of policy.
"His appointment won't make much difference as OPEC policy will still come down to whether individual members can agree on a common position."
However, Mallinson concedes that when oil prices finally rebound in a sustained fashion, the new secretary-general may have the ability to usher in a period of easier relations: "There may be more potential for co-operation once the period of low oil prices and the rebalancing period has passed."
Meanwhile, a Reuters survey shows that supply from OPEC has risen to 33.41 million barrels per day (bpd) in July from a revised 33.31 million bpd in June, the highest in recent history and something that has added downward pressure on prices, with oil LCOc1 falling to $42 as of last Friday.
For the record, Barkindo served for several years as one of Nigeria's OPEC representatives, and he was also managing director of state-owned Nigerian National Petroleum Corp. in 2010.
Jamie Webster, an independent analyst who regularly attends OPEC meetings, told Bloomberg that Barkindo's first task will probably be defining OPEC's function: "The big thing he's going to have to deal with is trying to show they're still relevant; they're searching for relevance in an era when they're not really making any decisions - not dead, but certainly in hibernation."
Igor Sechin, CEO of Rosneft and a key ally of Russian president Vladimir Putin, may well agree with Webster's sentiment: in May he pointed out that OPEC no longer has the ability to influence oil prices, and has "practically stopped existing" as a united organization.
