The expected solution
Following the Conference countries — participants of the OPEC cartel failed to agree on any production cuts, or even freeze it. This decision was expected. Last month only one of the 27 analysts surveyed by Bloomberg had forecast a consensus on this issue. The lack of consensus allows OPEC to continue to produce oil without restrictions, although the group regularly ignores their own guidelines over the last 15 years of actual production level only twice been below target both in 2014.
Participants in the discussions told the news Agency that before today’s meeting, Saudi Arabia, the unofficial leader of OPEC, discussed the return to the target reference point of extraction, from which the group declined in December 2015. However, the initiative was not framed in a formal proposal. According to Bloomberg, the softening of position of Riyadh is due to the desire of Khalid al-Fatiha, appointed new oil Minister of Saudi Arabia, to begin its work with a successful summit of the organization, which some analysts are already buried.
According to chief oil analyst at consulting firm Energy Aspects Amrita sen, the group discussed capping total production at 32 million barrels. per day, which corresponds with the actual production in April.
The Minister of oil of Iran, in turn, made it clear that there is a plan limit the production attractive. “I do not agree with the establishment of the overall ceiling for OPEC,” said Bijan Namdar Zanganeh. According to officials, the organization should return to a system of individual country quotas, which would be difficult to agree on in the meeting today. The proposals for reducing the production also sounds. Without the introduction of country quota team members would not be motivated to adjust their production, writes The New York Times. “Without the quota system there is no possibility to estimate the contribution of each country in the total production, — leads edition of the words of the head of a research firm Petroleum Policy Intelligence bill Farren-price. Is absolutely pointless”.
Attempts to agree on a freeze of production in the framework of the April summit of OPEC also failed because of Iran’s position, refused to assume such obligations. Previously, Saudi Arabia and its allies, including the UAE, have consistently said that Iran’s participation is an essential condition for any agreement. After removing from the country international sanctions, Iran refuses to assume the obligation to limit production, before the country will not return to pre-sanctions level of exports. In April, oil production in Iran has reached the pre-sanctions level was 3.56 million barrels. in the day, according to the international energy Agency (IEA). Oil exports for the month were close to the pre-sanctions level, an increase of more than 40%, or 600 thousand Barr., up to 2 million barrels. per day.
The OPEC conference is the Supreme organ of the organization, which convenes usually twice a year. The conference decides on the admission of new members, approves the Secretary-General, budget, financial report and Board of governors. Unlike the December meeting, this time between the different delegations in Vienna was a lot of “Shuttle diplomacy” is evidence that group members try to coordinate their positions before the official meeting, said an analyst with Bloomberg’s Julian Lee.
An experienced Manager
The main outcome of the summit was the decision a long time standing in front of the cartel’s personnel issue. Held the post of Secretary General of OPEC, Libyan Abdullah al-Badri had to leave this post back in 2012 (then ended the maximum allowed for the Secretary General of the organization of a six-year period of tenure). However, the cartel countries are unable to agree on a new Secretary-General, therefore, the decision was postponed. Now the change of Secretary General was held — at the head of the OPEC stood the former head of the Nigerian national petroleum Corporation (NPEC) Mohammed Barkindo. A new General Secretary is an experienced Manager in the oil industry — suffice it to say that in 2006 he has headed the cartel, and was also a representative of Nigeria in the OPEC for more than 15 years.
Despite the fact that Nigeria is in favour of a freeze of the production, the arrival of Barkindo for the post of OPEC Secretary General does not mean that such a decision will be made in the foreseeable future. The Secretary General of OPEC does not determine the policy of the cartel, the importance of this figure is more in the settlement of internal disputes in the organization. As earlier said the Agency Bloomberg head of consulting company Alfa Energy John Hall, Barkindo “knows the workings of OPEC, he is familiar with many delegates”, the post of Secretary General he will be able to provide a soft deadlock” in which the organization fell because of disagreements between member States (primarily Iran and Saudi Arabia). Sources of Reuters, who on the eve of the summit predicted Barkindo appointment to the post of Secretary General, also explained that the Nigerian is a compromise figure acceptable to all OPEC countries.
A short-term drop
Despite the fact that the decision to freeze the level of oil production, few expected seriously, the markets reacted to the results of the summit fell. Oil futures of Brent crude on the ICE Futures exchange with a high of $50,30 per barrel fell to $48,64, WTI crude oil at stock exchange NYMEX became cheaper with $49,47 up to $47 and 97 per barrel.
“No action, no surprises did not happen”, — says the head of the research division of the oil market, Societe General SA Michael Wittner on the outcome of the summit. “It was interesting to see that Saudi Arabia is ready to discuss the establishment of the overall ceiling of production, but Iran from its position is not moved, and in the end nothing came of it”, — the expert concludes.
Following the drop in oil prices on OPEC’s decision became cheaper and the ruble. As has declared to Agency Bloomberg chief economist at Danske Bank Vladimir miklashevskii, the decision of OPEC “expected to hit the Russian currency.” The expert believes that in the short term, the rouble is in the zone of high turbulence on the background of increasing external risks.”
Soon after the meeting of OPEC oil pared losses on statistics from US Department of energy on the reduction of crude oil in storage. As of 19:20 MSK barrel of Brent cost already $50,09.
Among adopted during the summit decisions — consent to the return of the African country of Gabon in the composition of the cartel after 11-year hiatus. The decision on the accession of Gabon OPEC will take effect from 1 July.
Gabon, where proven oil reserves amount to 2 billion bbl., OPEC was in 1975-1995 and left the organization because of the inability to pay membership dues. With a daily production of about 240 thousand Barr. Gabon will become the most conservative member of the cartel for the production of oil.