Opec may meet twice a year in its secretariat building in central Vienna, but the activity around delegates’ hotels in the days beforehand arguably reveals much more about the internal dynamics of the cartel.
Judging by the scenes in the Austrian capital this week Saudi Arabia remains king of Opec , but Iran is well and truly back.
While the lobby of the Grand Hotel, Saudi’s home base, thronged as ever, the InterContinental, where Iran’s delegation ritually stays, was at times besieged. News wires flew in Farsi speakers for the occasion and as the Iranian oil minister arrived even normally sober consultants jostled to capture his words.
Once Iran reached a historic preliminary agreement on its nuclear programme with world powers ten days ago, this meeting was always likely to be a chance to renew its Opec rivalry with Saudi Arabia . Iran’s oil minister did not disappoint, pledging to ramp up production if sanctions against its oil industry and exports are lifted and implicitly calling on Saudi Arabia to cut back output to allow it do so.
“When member countries, after limitation, return to the market, [other members] understand that they should open the doors . . . and not fight with him,” Bijan Zangeneh, Iran’s oil minister told journalists. He also suggested that if sanctions are lifted, Iran would continue to raise output even if prices collapsed to $20 per barrel – an implausible claim, but one designed to be noticed.
Indeed, the recurring motif of the week was that Saudi Arabia is under pressure to accommodate other members. Not just Iran, but Iraq and even Libya said those members which had benefited from their prolonged production issues should now make way.
“Somebody took our share of the market and it should be back,” said Abdel Bari Al-Arousi, Libya’s oil minister.
They were undoubtedly pointing to Saudi Arabia, and its Gulf neighbours Kuwait and the United Arab Emirates, which pumped crude at or close to record levels in response to customers and to make up for the output shortfalls of other Opec members.
And for the first time there were signs that the cartel may be beginning to recognise the challenges, both from ambitious members within and growing US shale production.
“I see 2014 as a normal year, [but] maybe 2015/2016 will be difficult,” said Abdalla El-Badri, Opec’s secretary-general.
The Gulf states, which have long been the engine of the cartel, are also considering how to accommodate other members. Iraq, which has been allowed to produce outside the group target of 30m b/d for many months, might be slowly coaxed back into the fold, they said. Opec might also look at publishing individual quotas again.
“One thing I want to be clear: It is in the interest of every member to keep the market balanced and that means eventually everyone will have to contribute,” said Mohammad Khuder Al-Shatti, Kuwait’s national representative to Opec.
But there is one giant problem with the narrative of a rising Iran. It won’t be quick. It will take time and investment to coax more oil out of dilapidated fields even if sanctions are lifted. What is more, in Iraq (security risks and infrastructure bottlenecks) and Libya (divided between militias) the prospects for production growth are bleak too.
“These pronouncements on how much they can raise supplies are fanciful,” says Bill Farren-Price, head of Petroleum Policy Intelligence. And that is why Brent crude oil has stayed steady above $100 per barrel, and for all the talk of a supply glut, Opec was able to keep production unchanged.
It also means that while Iran is back in Vienna’s hotel scene for sure, to match Saudi Arabia when it comes to the business end of Opec meetings, it needs to show it can grow production too.
The Commodities Note is a regular online commentary on the industry from the Financial Times
Copyright The Financial Times Limited 2013. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.
Judging by the scenes in the Austrian capital this week Saudi Arabia remains king of Opec , but Iran is well and truly back.
While the lobby of the Grand Hotel, Saudi’s home base, thronged as ever, the InterContinental, where Iran’s delegation ritually stays, was at times besieged. News wires flew in Farsi speakers for the occasion and as the Iranian oil minister arrived even normally sober consultants jostled to capture his words.
Once Iran reached a historic preliminary agreement on its nuclear programme with world powers ten days ago, this meeting was always likely to be a chance to renew its Opec rivalry with Saudi Arabia . Iran’s oil minister did not disappoint, pledging to ramp up production if sanctions against its oil industry and exports are lifted and implicitly calling on Saudi Arabia to cut back output to allow it do so.
“When member countries, after limitation, return to the market, [other members] understand that they should open the doors . . . and not fight with him,” Bijan Zangeneh, Iran’s oil minister told journalists. He also suggested that if sanctions are lifted, Iran would continue to raise output even if prices collapsed to $20 per barrel – an implausible claim, but one designed to be noticed.
Indeed, the recurring motif of the week was that Saudi Arabia is under pressure to accommodate other members. Not just Iran, but Iraq and even Libya said those members which had benefited from their prolonged production issues should now make way.
“Somebody took our share of the market and it should be back,” said Abdel Bari Al-Arousi, Libya’s oil minister.
They were undoubtedly pointing to Saudi Arabia, and its Gulf neighbours Kuwait and the United Arab Emirates, which pumped crude at or close to record levels in response to customers and to make up for the output shortfalls of other Opec members.
And for the first time there were signs that the cartel may be beginning to recognise the challenges, both from ambitious members within and growing US shale production.
“I see 2014 as a normal year, [but] maybe 2015/2016 will be difficult,” said Abdalla El-Badri, Opec’s secretary-general.
The Gulf states, which have long been the engine of the cartel, are also considering how to accommodate other members. Iraq, which has been allowed to produce outside the group target of 30m b/d for many months, might be slowly coaxed back into the fold, they said. Opec might also look at publishing individual quotas again.
“One thing I want to be clear: It is in the interest of every member to keep the market balanced and that means eventually everyone will have to contribute,” said Mohammad Khuder Al-Shatti, Kuwait’s national representative to Opec.
But there is one giant problem with the narrative of a rising Iran. It won’t be quick. It will take time and investment to coax more oil out of dilapidated fields even if sanctions are lifted. What is more, in Iraq (security risks and infrastructure bottlenecks) and Libya (divided between militias) the prospects for production growth are bleak too.
“These pronouncements on how much they can raise supplies are fanciful,” says Bill Farren-Price, head of Petroleum Policy Intelligence. And that is why Brent crude oil has stayed steady above $100 per barrel, and for all the talk of a supply glut, Opec was able to keep production unchanged.
It also means that while Iran is back in Vienna’s hotel scene for sure, to match Saudi Arabia when it comes to the business end of Opec meetings, it needs to show it can grow production too.
The Commodities Note is a regular online commentary on the industry from the Financial Times
Copyright The Financial Times Limited 2013. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.
