Saudi-Iran ri­val­ries could scut­tle ten­ta­tive OPEC deal

Daily Local News (West Chester, PA) - - WEATHER - By Ge­orge Jahn and Kiyoko Met­zler

VI­ENNA >> Up to this week, chances that OPEC coun­tries would agree to their first cut in out­put in eight years were look­ing good. Now, not so much.

Saud Ara­bia is ques­tion­ing an in­for­mal agreement made in Septem­ber to trim pro­duc­tion. And the desert king­dom, which ac­counts for about a third of OPEC’s out­put, nor­mally pre­vails at min­is­te­rial meet­ings.

Whether OPEC de­cides to cut or not at their meet­ing Wed­nes­day will in­flu­ence en­ergy prices around the world as the car­tel re­mains the dom­i­nant force in oil mar­kets. The price of crude fell about 4 per­cent Tues­day as it ap­peared un­cer­tain that a cut might be agreed upon.

Still, a deal is not out of the ques­tion, and even a remote pos­si­bil­ity that it will be backed is an ex­cit­ing prospect. Spencer Welch, an an­a­lyst with IHS en­ergy, casts the event as “po­ten­tially the most im­por­tant OPEC meet­ing since 1973,” when the car­tel im­posed a highly ef­fec­tive oil em­bargo on the West.

Those days of OPEC unity have been re­placed by in­fight­ing and ri­val­ries that have tar­nished the car­tel’s image and crip­pled its abil­ity to set world prices and sup­plies.

In­stead of cut­backs, Saudi oil min­is­ter Khalid Al-Falih says the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries should do no more than what it has done for nearly a decade — sit back and let de­mand drive up prices “with­out an in­ter­ven­tion from OPEC.”

He told re­porters that the Vi­enna meet­ing is wide open, declar­ing: “We don’t have a sin­gle path, which is to cut pro­duc­tion.”

The Saudi stance raises chances not only of yet an­other in­con­clu­sive meet­ing. It also re­fo­cuses the spot­light on the bat­tle for in­flu­ence be­tween the Saudis and Iran.

Once sec­ond only to Saudi Ara­bia in pro­duc­tion within OPEC, Iran chafed for years un­der sanc­tions that crimped its oil sales while watch­ing its ri­val in­crease its out­put. With sanc­tions lifted this year as a re­sult of a nu­clear agreement, Iran is look­ing to re­gain its mar­ket share within OPEC while push­ing the Saudis to give up gains it says were made while Tehran was sanc­tioned.

Al-Falih may be hop­ing that his ap­par­ent about­turn on out­put cuts will pres­sure Iran and other mem­bers to be more open to re­duc­ing their own pro­duc­tion in­stead of wait­ing for the Saudis to go it alone. And at least one im­por­tant mem­ber ap­pears to be lis­ten­ing.

Iraqi Prime Min­is­ter Haider al-Abadi told The As­so­ci­ated Press that his coun­try is ready to pare back out­put as part of an over­all OPEC de­crease of 900,000 to 1.2 mil­lion bar­rels per day. That would be cut of be­tween 2.7 per­cent and 3.6 per­cent from Oc­to­ber lev­els.

But Tehran in­sists the onus is on the Saudis. Al­lud­ing to its Mideast ri­val, Ira­nian oil min­is­ter Bi­jan Zan­ganeh said that OPEC mem­bers that had in­creased pro­duc­tion “dra­mat­i­cally ... should nat­u­rally ac­cept more re­spon­si­bil­ity for de­creas­ing pro­duc­tion.”

Iran’s semi-of­fi­cial Mehr news agency opted for tougher lan­guage, ac­cus­ing the Saudis of wag­ing a “full-blown psy­cho­log­i­cal war” against other mem­bers af­ter hav­ing “seized share of other OPEC man­u­fac­tur­ers”.

The Saudis, said Mehr, want to “main­tain the high­est pro­duc­tion ca­pac­ity while ig­nor­ing in­ter­ests of other mem­bers.”

The dis­pute over which coun­try cuts by how much ap­peared un­re­solved Tues­day evening with United Arab Emi­rates’ oil min­is­ter Suhail Mo­hamed Al Mazrouei say­ing that “the biggest bar­rier is that some are not par­tic­i­pat­ing.”

Rus­sia and other ma­jor non-OPEC pro­duc­ers had sig­naled readi­ness to co­op­er­ate af­ter the Septem­ber meet­ing. But af­ter Saudi Ara­bia stayed away from tech­ni­cal pre-meet­ing talks on Mon­day, Rus­sia also de­clined to join. Now, with the in­ter­nal OPEC dis­pute brew­ing, Rus­sia and other oil pro­duc­ers out­side the car­tel are wait­ing to see how the min­is­ters’ meet­ing plays out.

Even a full OPEC cut will not re­store crude prices to the lev­els over $100 that a bar­rel fetched in June of 2014, be­fore in­creased out­put from the U.S. and other non-OPEC coun­tries led to over­sup­ply.


Iran’s Min­is­ter of Petroleum Bi­jan Nam­dar Zan­geneh speaks to jour­nal­ists at a ho­tel in Vi­enna on Tues­day.

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