Saudis pledge not to flood oil market with additional barrels
Print Edition
SAUDI Arabia promised yesterday not to flood the oil market with extra barrels even as OPEC failed to agree on output policy, with Iran insisting on the right to raise production steeply.
Tensions between the Sunni-led kingdom and the Shi’ite Islamic Republic have been the highlight of several previous OPEC meetings, including in December 2015 when the group failed to agree on a formal output target for the first time in years.
Tensions were less acute yesterday as Saudi Arabia’s new energy minister, Khalid al-Falih, showed Riyadh wanted to be more conciliatory and the Organization of the Petroleum Exporting Countries decided unanimously to appoint Nigeria’s Mohammed Barkindo as the group’s new secretary-general.
Several OPEC sources said Saudi Arabia and its Gulf allies had tried to propose a new collective ceiling in an attempt to repair OPEC’s waning importance and end a market-share battle that has sapped prices and cut investment.
But OPEC sources said the organization had failed to agree on output policy and set a new ceiling.
Despite the setback, Saudi Arabia moved to soothe market fears that failure to reach any deal would prompt OPEC’s largest producer, already pumping near record highs, to raise production further to punish rivals and gain additional market share.
“We will be very gentle in our approach and make sure we don’t shock the market in any way,” Falih said.
“There is no reason to expect that Saudi Arabia is going to go on a flooding campaign,” Falih said when asked whether Saudi Arabia could add more barrels to the market.
The market has grown increasingly used to OPEC clashes over the past two years as political foes Riyadh and Tehran fight proxy wars in Syria and Yemen.
Tehran has been the main stumbling block for OPEC to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.
Tehran argues it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over Iran’s nuclear program.
Iranian Oil Minister Bijan Zanganeh said Tehran would not support any new collective output ceiling and wanted the debate to focus on the production quotas of individual countries.
“Without country quotas, OPEC cannot control anything,” Zanganeh said. He insisted Tehran deserved a quota — based on historic output levels — of 14.5 percent of OPEC’s overall production.
OPEC is pumping 32.5 million barrels per day, which would give Iran a quota of 4.7 million bpd — well above its current production of 3.8 million, according to Tehran’s estimates, and 3.5 million, based on market estimates.
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