Date
27 May 2017
Oil prices have been hovering near a six-year low since Saudi spearheaded a decision to maintain output and fight for market share rather than cut production. Photo: Bloomberg
Oil prices have been hovering near a six-year low since Saudi spearheaded a decision to maintain output and fight for market share rather than cut production. Photo: Bloomberg

OPEC likely to maintain status quo on output

OPEC looked on track to maintain the status quo after member states clashed over oil production policy at an informal gathering before the group’s official meeting in Vienna on Friday.

Saudi Arabia held its line on Thursday, insisting other big producers outside the group such as Russia would have to join any output cuts by the Organization of Petroleum Exporting Countries, Bloomberg News reported, citing a source with knowledge of the discussions in a Viennese hotel.

With oil prices hovering near a six-year low, cash-strapped countries including Venezuela, Ecuador and Algeria are pressuring Saudi Arabia to cut production.

A year ago, Riyadh spearheaded a decision to maintain output and fight for market share rather than cut production to sustain high oil prices.

The move helped to send Brent crude, the global benchmark, down to US$42 a barrel from near US$100.

The Saudis, the world’s largest oil exporters, have stuck to their one-year-old view that any output cuts won’t work unless big producers outside OPEC, including Russia and Mexico, join.

If prices recover sharply, it could revive some US shale production, displacing OPEC crude.

Russia, Mexico and other big producers outside OPEC have given no indication they would agree to any OPEC-led output cuts.

Russian Energy Minister Alexander Novak said Thursday the country doesn’t see a production cut as viable.

Ecuador Oil Minister Carlos Pareja said the pre-meeting — unusual in recent years and held in a hotel rather than at OPEC’s headquarters — was “difficult”.

“We didn’t manage to reach an agreement yet,” he said.

At the informal gathering in a Viennese hotel, Venezuela tabled a proposal to reduce current production by about 5 percent, Bloomberg quoted the source saying.

Several other countries backed the proposal, the source said. Nigerian Minister of State for Petroleum Resources Emmanuel Ibe Kachikwu said Saudi Arabia didn’t propose a cut.

The divisions are a sign of how a year of low prices — and the prospect of more months of cheap oil — are hurting OPEC nations.

The 12-member group’s annual revenue may fall to US$550 billion from an average of more than US$1 trillion in the past five years, the International Energy Agency said last month.

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CG

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