Saudi-Iran split im­pacts OPEC deal

Enterprise - - International news -

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.

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