Thursday 21 June 2018

Ali Al-Naimi talks to journalists after the meeting

For a change, all 'happy, happy' at Opec

Vienna, June 12, 2014

Opec sailed through a brief, calm meeting on Wednesday - even as oil prices rose to $110 on barrel on concern renewed strife could hit Iraq's output and deepen a supply shortfall from chaotic Libya and sanctions-bound Iran.

Oil ministers painted a soothing image of good supply, and prices beneficial to all, although some among them struggled to eke out exports.

Consuming nations might bank on sharply higher supply from Libya, Iran and Iraq, on the basis of their bullish estimates of future exports this week - but only once they have put present troubles behind them.

The Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil, agreed, as expected, keep its 30 million barrels per day output ceiling unchanged for another six months.

"The customer is happy, the producer is happy, the consumer is happy, everybody is happy, the market is in balance, everything is good, this is the best time," Saudi Oil Minister Ali Al-Naimi said.

A relaxed Al-Naimi interrupted a vacation to appear in Vienna on the morning of the meeting.

Opec's meeting in December 2013 was shadowed by the prospect of a rising tide of output from resurgent Iran and Iraq giving the group a headache for the next year.

Six months on that wave of oil looks no nearer, with concern veering to shortfalls rather than gluts, and the shock of events in Iraq troubling delegates more behind the scenes.

Even as Iraq's Oil Minister Abdul Kareem Luaibi sketched out plans to boost output in Opec's second biggest producer, Sunni Islamist insurgents in the north seized control of Mosul - Iraq's second city and pressed on to Iraq's biggest oil refinery at Baiji.

Luiabi stressed a bomb attack had already knocked out Iraq's northern export pipeline.

"All our exports now are from the Basra terminal in the south - and it's a very, very safe area," Luaibi said.

Opec would naturally look to Saudi Arabia's spare capacity, the largest in the group, to cover a greater loss of Iraqi oil but with the kingdom currently producing 9.7 million bpd a sustained stretch of perhaps an additional million may prove a strain, delegates said.

Saudi's record output stands at 10.2 million bpd, although it could count on some support too from Kuwait and the UAE.

The world's top exporter will be pumping harder in any case given higher domestic consumption during the summer months.


Opec has weathered conflicts before, even between its members, but has so far been fortunate that the headwind of exports lost to Libya's civil strife has been eased by rising output elsewhere, most notably by the boom in US production.

"The most important in this process is Libya," said Opec Secretary-General Abdullah Al-Badri. "The other ones - the production will increase gradually."

Analysts said the outages, while not representing an emergency yet, meant there was no room for other serious stoppages.

"The US shale story has given the market a false sense of security," said Yasser Elguindi of Medley Global Advisors. "The best case scenario this year is for a balanced market. There is no room for further supply deterioration."

Libya's Oil Minister Omar Shakmak was candid about prospects for reopening export ports and output shut in by the chaos of conflicting factions.

"It's out of our control what's happening," he said. "It's out of the control of the oil and gas sector."

Output could bounce back to close to normal around 1.4 million bpd in nine months if order were restored, Shakmak said, but was currently trickling out at not much more than a tenth of that.

Iran also vowed a quick return to the centre stage as a leading producer, but only once international sanctions over its nuclear programme are withdrawn.

Oil Minister Bijan Zanganeh said Tehran could increase oil exports by 500,000 barrels per day immediately after any lifting of sanctions.

"Very quickly we can increase by half a million and after a couple of months we can increase it to 700,000 barrels per day," he said.

But in Geneva talks, progress on solving the nuclear impasse and allowing Iran to export more oil looked stickier. They could extended for six months if no deal is reached by a July 20 deadline agreed by all parties.

Opec has raised its 2014 demand forecast 29.76 million bpd, comfortably inside its ceiling, but the International Energy Agency, representing the United States and leading industrialized oil consumers, sees a tighter fit of around 30 million bpd. - Reuters

Tags: Oil | Opec | Output |

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