The Organization of Petroleum Exporting Countries (OPEC) on Thursday refrained from changing its oil output policy after it failed to agree on a new production ceiling.
The Organization last decided to change output in December 2008, and for oil-price hawks such as Iran, fears are growing that the 56-year-old OPEC is losing its role as a production-setting cartel and turning into a talking shop.
WTI futures sank on the news with oil trading at $48 a barrel, after starting the session around $49.0 a barrel.
Saudi Arabia’s oil minister, Khalid Al-Falih, after the meeting told journalists at the organization’s headquarters in the Austrian capital that the spirit of the meeting was cooperative and collaborative.
“We are extremely happy, I think the market is in good shape. The market is balancing, trends are all good in terms of supply and demand, prices have recovered somewhat and I believe that they will continue to recover,” he said.
Also, Iranian Oil Minister, Bijan Zanganeh, said that OPEC members did not discuss a production freeze. “It seems that the members believe that it should manage the market without discussing about the freeze. Because a freeze, I think is a matter of history,” he added.
Sources across the global markets said that investors were closely eyeing the meeting with mounting tensions between the 13 members of the producer group – and the differing economic needs of each country.
OPEC ministers were sighted arriving at the organization’s headquarters appeared to be at odds over what the bloc’s next move should be but some members, such as Kuwait and Qatar appeared to lean towards the Saudi Arabian way of thinking – agreeing on the need for an output ceiling – others such as Venezuela and Algeria seemed to agree with Iran, which said an output ceiling must be accompanied by a country-specific quota system.
Other oil ministers, such as Nigeria’s, called for open-minded discussion and unity – something that has been in short supply at previous meetings.
Although, OPEC was not expected to cut or freeze oil production levels at the meeting – ideas that failed to find unanimous support at its last meeting in Doha in April. Hopes of a deal were dashed in April after Iran – an OPEC member that is trying to revive its oil industry after years of economic sanctions – refused outright to consider a freeze.
Abdalla Salem el-Badri, Secretary General of OPEC, revealed that for the first time in many months there was a “very positive” atmosphere among the cartel’s members, however. He said he was pleased with the way the oil market was recovering – now close to $50 per barrel.
The meeting comes amid tensions between OPEC members. Iran’s brake on a Doha deal angered OPEC’s de facto leader Saudi Arabia and further damaged relations between the Middle Eastern rivals but there was talk this week that Saudi Arabia could be trying to revive formal output targets, with Iran’s oil minister rejecting the idea yet again.
“An output ceiling has no benefit to us,” Bijan Zanganeh told reporters in Vienna on Wednesday, reiterating Iran’s call for individual country quotas.
Within the OPEC group, poorer producers have also struggled to make wealthier Gulf members, who have been able to weather lower oil prices better, change course. Those differences over OPEC’s strategy were evident on Thursday.
United Arab Emirates Oil Minister Suhail bin Mohammed al-Mazroui told CNBC on Thursday that his country was ready to discuss a production cap “provided that everyone is participating.”
“All of those who went to Doha were interested in principle and whether we achieve it or not is subject for discussion when we meet in the closed session.”
Aside from Iran’s refusal to budge over output, tensions between OPEC members have been growing steadily since November 2014. Then, OPEC decided to keep on pumping oil at record levels despite a drop in global oil prices. OPEC had an official production ceiling of 30 million barrels a day but the target was effectively abandoned in December, allowing members to pump freely and adding to a global glut in oil.
The decision was seen as a strategy, led by Saudi Arabia, to retain market share in the face of rival non-OPEC producers but it has hurt the group’s poorer members, the so-called “fragile five” (Venezuela, Nigeria, Libya, Algeria and Iraq) which have pleaded before for an OPEC output cut, to no avail.
Oil prices have since started to recover as non-OPEC supply comes off the market, but whether OPEC can rebuild itself as a united organization in this meeting remains to be seen.
Meanwhile, Anas Al-Saleh, Kuwait’s acting oil minister, expressed optimism that OPEC’s strategy since 2014 had been “working well” and that oil markets were stabilizing. But his counterpart from Venezuela, Euologio del Pino, said that the group should be able to “adjust to the recovery of production of countries like Iran” and that new ideas should be considered. “We’re also looking at some new ideas – the possibility to have a supply-production range per country,” he said, referencing the potential for a quota system as proposed by Iran.” He mentioned