On Monday 8 August, Dr. Mohammad bin Saleh Al-Sada, the Minister of Energy and Industry for Qatar and also the current OPEC President, announced that “Higher oil demand is expected in the 3rd. and 4th. Quarters”. This supposedly signified good news for OPEC and other producers of oil particularly as he then went on to say that the recent decline in oil prices was only temporary. He added that OPEC members, like all other producers, would be attending the International Energy Forum in Algeria from 26 to 28 September and that during this time there would be an opportunity to meet and, I assume, discuss matters of mutual interest.
However, it will not be an official meeting and although this statement was issued by the OPEC Secretariat, so far, there is no reference to any form of OPEC Meeting on the OPEC web site. The statement simply declares that the strategy of not cutting output is working well and that there is no cause for concern, yet the fact that he goes on to say that they will meet, as they are bound to do anyway, sends a message to the watching world that OPEC “could” make a move.
As for an agenda, if there is one, other than bleating from Venezuela, will be for Saudi to assert its influence and control over the group. It cannot be seen to be wavering. The fact that OPEC members, where they can, have been increasing output recently indicates the high level of competition that exists between them individually and also collectively with the other World producers.
Earlier in the year there was talk of a deal by which output would be frozen at maximum levels although Iran was not a party to this and then later in April the meeting involving OPEC and Russia but again excluding Iran, completely failed and was an absolute waste of time, very much to the detriment of OPEC. Shortly afterwards, we had the official OPEC Meeting in June at which no decisions were made other than to follow the market and meet again in November. Rumours run around the market and fire up traders who rush to buy at the earliest hint of action. Yet, during the last two years there hasn’t been any.
If OPEC wishes to retain any credibility, it will treat the IEF as simply an opportunity to keep in touch with fellow members and other world producers as it will be futile to attempt to agree a meaningful outcome on an informal basis, when the leading members of OPEC have been producing at record levels – Saudi at 10.67mbpd, Iran at 3.85mbpd and Iraq at 4.6mbpd – irrespective of whether it is to satisfy domestic demand or exports and at least two of them Iran and Iraq have plans to increase further.
Fundamentally, a freeze at record high levels would be meaningless anyway as they are the levels that are holding the rebalancing of the market back and therefore the only difference would be of OPEC decided to cut and it can’t do that because no one will want to reduce the share they have fought so hard to develop and hold on to. Two OPEC Members, Libya and Nigeria are way down on output levels and each will return at some point to make up the combined difference of well over another 1mbpd and even without this, OPEC still managed to exceed 33mbpd in July!
There will not be a meaningful outcome to this meeting and the saga will roll on until the next official Meeting at the end of November. By that time, winter will have moved in and demand will have picked up and the outlook will probably look brighter for OPEC.