OPEC will stick to its policy of unfettered production after members failed to agree on a new output ceiling, but ministers were united in their optimism that global oil markets are improving.
While crude prices dipped after Thursday’s meeting, there was little of the rancor that punctuated last December’s summit. The group was also able to appoint a new secretary-general — Nigeria’s Mohammed Barkindo — something it couldn’t agree on last year.
All members see the same market fundamentals and have been “highly cooperative,” new Saudi Oil Minister Khalid Al-Falih told reporters in Vienna. Iran’s Bijan Namdar Zanganeh reported “very good unity,” while his Nigerian counterpart said relations had improved “substantially” and even Venezuela — a strong supporter of freezing output — said the meeting was “very positive.”
Saudi Arabia had floated the idea of restoring a group production ceiling though members decided it wasn’t necessary at this stage. OPEC needs more time to come up with an output cap, outgoing Secretary-General Abdalla El-Badri said after the meeting, adding that it’s hard to find a target when Iranian production is rising and significant Libyan volumes are halted.
“There was far less animosity between those players who did not necessarily see eye-to-eye in the last few meetings,” said Amrita Sen, chief oil analyst at consultant Energy Aspects. “The fact that the group managed to elect a new secretary-general after so many failed attempts also points towards a small measure of cooperation.”
Barkindo, who was acting head of OPEC in 2006 and previously ran Nigerian National Petroleum Corp., will assume OPEC’s top job on Aug. 1. El-Badri, a 76-year-old Libyan who has held the role for nine years, was originally due to step down in 2012 after serving the maximum two terms, but his tenure was extended at successive meetings as members were unable to agree on a replacement.
Thursday’s summit follows a recovery in oil to almost $50 a barrel from below $30 in January after depressed prices took their toll on supplies. That suggests OPEC’s Saudi-led decision in 2014 to maintain output amid a global glut is finally paying off, with higher-cost producers cutting back.
Yet divisions within OPEC remain. While Saudi Arabia had shown willingness to mend divisions Thursday with cash-strapped members demanding a new group ceiling, Iran said it would only support individual country quotas that would be difficult to agree in a single meeting.
“I guess the political differences between arch rivals Saudi Arabia and Iran prevented a deal,” Giovanni Staunovo, an analyst at UBS Group, said by email. “Different priorities among the member states and higher oil prices reduce the urgency for any production deals.”
Iran has rejected any cap on output as it restores volumes following the removal of sanctions in January. The country’s refusal to participate in a production freeze proposed earlier this year prompted Saudi Arabia to block a deal between OPEC and Russia in April.
Although OPEC regularly ignores its own output targets and there was no suggestion anyone would cut production Thursday, even a token gesture could have helped to boost prices. Brent crude dropped as much as 1.8 percent, and was down 0.4 percent at $49.54 a barrel at 4:24 p.m. in London.
“The lack of an oil production target is bearish for prices, especially because hopes of a deal had increased in the past couple of days,” Jason Schenker, president of Prestige Economics LLC, said in an e-mailed note. “Say goodbye to OPEC’s efficacy as a united group.”