Saudi-Iran split impacts OPEC deal
The collapse in relations between Saudi Arabia and Iran after the Saudi execution of a Shia cleric puts an end to speculation that OPEC could somehow agree to production curbs to lift the price of oil anytime soon.
A survey of OPEC production showed that Saudi Arabia ended 2015 with its output at full tilt, with no sign of cutting supply to make room for Iran, which plans to ramp up its own output when international financial sanctions are lifted this year.
According to the survey, compiled from shipping data, oil company figures and industry experts, Saudi production for December averaged 10.15 million barrels per day.
That means it was above 10 million barrels per day for nine straight months, the longest period of sustained production above that threshold for decades.
The determination by the world´s biggest exporter Saudi Arabia to defend its market share despite a global glut has helped drive oil prices to their lowest in 11 years.
Meanwhile, the lifting of sanctions on Iran in line with a nuclear agreement is expected to provide the biggest increase in supply of 2016. The world is now producing 1.5 million barrels a day more than it is consuming, and Iran is promising to add one million bpd to supply over the next 12 months.
The Organization of Petroleum Exporting Countries failed to agree any caps on production at its annual meeting in Vienna in December last year, amid acrimony between Saudi Arabia and Iran, the Gulf region´ s main Sunni and Shiite powers.
If there was still any suggestion that the two rivals might somehow overcome their animosity to agree to manage supply this year, it was buried when Riyadh called off diplomatic ties with Tehran over Iran´ s response to the execution of Saudi Shiite cleric Nimr alNimr.
According to several OPEC delegates, they now saw no chance of any improvement in relations between OPEC members, which have been already very low over the past months.
“This new situation will just make it worse and I see no agreement to be reached within OPEC,” one representative to OPEC from a member country outside the Gulf region said, on condition of anonymity.