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OPEC meeting ‘might be one of the worst since 2011’ amid differences over supply


The forthcoming meeting between OPEC and non-OPEC oil producers, including Russia, could be one of the most fractious in recent years with competing interests and demands at play, according to oil market experts.

OPEC’s production policy will dominate the agenda when the world’s major oil producers meet in Vienna on June 22, with arguments expected over whether to increase production or maintain supply as it is.

Saudi Arabia and Russia are reportedly ready to increase oil output while others like Iran and Iraq are against such a move. As such, the discussions might not be pretty, the head of commodity research at Commerzbank told CNBC Thursday.

“It might be one of the worst OPEC meetings since 2011,” Eugen Weinberg told CNBC’s “Squawk Box Europe,” explaining that the differences in opinion over production could cause problems.

An OPEC meeting in 2011 was marked by infighting between members and disagreements over whether to tackle high oil prices (then around $118 a barrel) by increasing production. Gulf states wanted to increase supply to ease prices but were outnumbered by other OPEC members, including Iran and Venezuela, that wanted to maintain supply levels. At the time, Saudi Arabia described the summit as “one of the worst meetings we have ever had.”

Weinberg said OPEC would try to find a solution this time but it might not be so simple.

“I think OPEC will try to somehow moderate the current situation but it will be very difficult given their opposite sides and the huge difference and the divergence in the views from the countries with no spare capacity like Iran and Iraq on one side who are pushing for no production increase and the others like Russia and Saudi Arabia and Kuwait who have more spare capacity and are wishing to increase production on the other side,” he said.

“Whether an agreement will be possible in this situation is questionable,” he added.

Reassuring consumers

The June 22 meeting will see officials from each of OPEC’s 14 member countries meet with non-OPEC producer Russia to discuss what to do next with a deal that has seen them collaborate to curb production in order to support prices.

The meeting comes as the U.S. government is reportedly pushing for Saudi Arabia and other OPEC members to hike oil production. In April, President Donald Trump publicly lashed out at rising prices which have hit consumers hard in the States. In addition, U.S. Treasury Secretary Steven Mnuchin said last month that Washington was trying to persuade oil producers to increase supply and offset the impact of forthcoming sanctions on Iran.

OPEC President, Saudi Arabia's Energy Minister Khalid al-Falih, and OPEC Secretary General Mohammad Barkindo talk to journalists before the beginning of a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, May 25, 2017.

Leonhard Foeger | Reuters
OPEC President, Saudi Arabia’s Energy Minister Khalid al-Falih, and OPEC Secretary General Mohammad Barkindo talk to journalists before the beginning of a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, May 25, 2017.

There are also concerns about supply shortages from OPEC member Venezuela, which is experiencing economic and political upheaval. Amid fears over shortages from some major producers, Saudi Arabia and Russia have signaled that they’re likely to gradually revive oil output in the second half of the year — which would likely cause prices to weaken.

Saudi Oil Minister Khalid Al-Falih said in May that the country is “sharing the anxiety of consuming nations” and his comments were echoed by Russian Energy Minister Alexander Novak who said that Russia is ready to increase production soon. But Novak warned that a decision should be taken at the OPEC meeting and should be unanimous. The ministers are due to meet on June 14 ahead of the official OPEC summit.

The OPEC and non-OPEC strategy that has been in place since November 2016 has certainly worked to increase prices from the lows of around $25 a barrel in 2014 — when the glut in global supply hit home — to currently trade around $75 for Brent and $65 for West Texas Intermediate.

Commerzbank’s Weinberg said it is likely that major oil producers at the June 22 meeting will try to reassure consumers that they are ready to increase production if Iranian oil is taken off the market, to allay fears over price rises.

“If the production increase is not in the range of 500,000 plus (barrels per day) I think the market might be disappointed and might push higher. But I think that what is really going to happen is that the Gulf nations as well as Russia will reassure consumers that despite the possibility of Iranian sanctions in the fourth quarter they will be satisfying the needs of the customer.”


11 Comments on "OPEC meeting ‘might be one of the worst since 2011’ amid differences over supply"

  1. JuanP on Thu, 7th Jun 2018 8:01 am 

    I thought OPEC was finished before they managed to implement these latest cuts; I was wrong. I expect the Saudis to comply with Trump’s request to increase extraction since they want to fuck the Iranians, too. The US, Israel, and KSA are the new “global coalition” fighting Iran; they will probably be supported by the UAE and Bahrain (traditional Iran enemies). Western Europe will most likely yield to the USA on Iran no matter what they say because they are a US colony.

  2. joe on Thu, 7th Jun 2018 9:33 am 

    Seems an obvious play that the current swing producing tight oil plays can allow the market to be manipulated like this. Tight oil is a loss maker overall anyway and can’t survive a high interest rate world.
    Low growth, low inflation, low oil price, the story of the post Great Recession western world. And when you pretend there is no global warming, no danger either.

  3. Outcast_Searcher on Thu, 7th Jun 2018 4:02 pm 

    So Joe, let’s pretend WTI prices didn’t rise to nearly $100 in 2010 and stay there for four years. And let’s pretend WTI prices didn’t nearly triple from the lows in 2016 to well over $70 recently (falling back on concerns OPEC might produce significantly more).

    So what low oil prices are you talking about?

    And given global demand continuing to rise and an ongoing deficit of new oil found, it looks like the medium term price will have upward pressure.

    But let’s pretend none of that’s true since doooooooooom.

  4. JuanP on Thu, 7th Jun 2018 5:39 pm 

    “Russia vs Saudi Arabia World Cup Opener Could Have Impact on Global Oil Market”

    Russia, Saudi Arabia, Egypt, and, my country, Uruguay, are the four members of the Russia 2018 World Cup Group A. Their FIFA team ratings are Russia, 70 (the worst qualified team in the cup), Saudi Arabia, 67 (second worst), Egypt, 45, and Uruguay, 14. Russia has the worst rated team to ever play in a World Cup (they only qualified because they are the hosts). Russia will play Saudi Arabia first, then Egypt, and Uruguay last in the first round. Russia would be lucky to move on to the second round and it will likely be Uruguay that will disqualify them. I’d rather Russia moved on than any other team in the group, including Uruguay.

    I hope the Americans, Ukranians, and other motherfuckers let Russia host this event without any false flag or terrorist attacks. I am afraid that the Americans and Ukranians will not let this opportunity to attack Russia pass, though, because this is basically their last chance to attack Russia at a critical time. I fear they may restart the war in Novorossiya during the games. Whatever happens I know that Russia will prevail over these murderers, terrorists, and criminals. Go Russia! Long live Putin!

  5. Cloggie on Fri, 8th Jun 2018 12:11 am 

    I’ll keep my fingers crossed for Russia as well, with little expectations though. They just lost from f* Turkey.

    I hope Russia at least beats KSA and Egypt.

    Germany, yawn, is #1 in the rankings, but they could not beat anybody during the last 5 games.

    Nevertheless I would put my money on Germany.

    If I were Putin I would be on guard for a nasty event during the cup, like Sochi-Maidan in 2014:

    You can expect anything from the (((enemy of mankind)))

  6. Cloggie on Fri, 8th Jun 2018 12:13 am 

    Oops, Russia didn’t lose, just a draw. And Turkey is much better than either KSA or Egypt. But Russia could not win during the last 7 games either.

  7. Sissyfuss on Fri, 8th Jun 2018 9:11 am 

    Cloffsides, is there anything more exciting than a nil-nil soccer match? Perhaps clipping ones toenails.

  8. Cloggie on Fri, 8th Jun 2018 12:08 pm 

    Cloffsides, is there anything more exciting than a nil-nil soccer match? Perhaps clipping ones toenails.

    That is what I would say too if I were #25 in the global ranking. 🙂

  9. Cloggie on Fri, 8th Jun 2018 2:23 pm 

    Germany has beaten KSA 2-1 in this very minute.

  10. Cloggie on Fri, 8th Jun 2018 2:27 pm 

    “Would not it be nice if we get along with Russia”-latest:

    Trump wants Russia back in G8, but Euro-f*ckers refuse, except for Italy.

    Trump has not changed.

  11. JuanP on Fri, 8th Jun 2018 4:15 pm 

    Cloggie, The Kremlin spokesman, Dmitry Peskov, has already oficially replied that Russia is not interested in rejoining the G7 and will continue focusing on other international cooperation formats. Russia oficially left the G8 last year and I don’t expect them to rejoin it in the foreseeable future. The G7 is nothing more than a bunch of collapsing have beens. The future is BRICS, AIIB, SCO, EAEU, CIS, etc.

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