Saudi Arabia and its Gulf allies are at odds with Iran and other OPEC members over whether the organization should include oil-price forecasts in its long-term strategy report, according to three of the group’s delegates.
The Gulf kingdom, which has led the Organization of Petroleum Exporting Countries in a battle against rival producers, is seeking to exclude price assumptions from the report, according to the delegates, who asked not to be identified because the document isn’t public. The disagreement reflects internal divisions over whether OPEC policy should focus on prices or the stability of the oil market, one of the delegates said.
Oil prices plunged to a six-year low last month as OPEC kept its taps open in an effort to pressure competitors such as U.S. shale drillers to cut production. Saudi Arabia, Kuwait, Qatar and the United Arab Emirates overcame opposition from Iran and the group’s seven other members last November to adopt that strategy. OPEC has since lost billions of dollars in revenue, pushing some members to the brink of economic crisis and prompting calls from Algeria and Venezuela for a change in policy.
Read Also:
“I haven’t received the formal report for the position of Saudi Arabia,” Iran Oil Minister Bijan Namdar Zanganeh said when asked about the disagreement in an interview in Tehran Tuesday. While it may take some months for members to exchange views, they are mature enough to resolve differences and “after ups and downs OPEC will reach an agreement for managing the market.”
Price Forecasts
OPEC’s strategy review is due for completion later this year. The previous edition produced in 2010 estimated crude would trade in a range of $70 to $86 a barrel through to 2020, then climb to $106 by 2030.
“Clearly there’s a lot of time spent within OPEC weighing the market impact that anything coming out of the organization can have,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. “There’s certainly a lack of serenity in the group at the moment.”
While most OPEC members would like to see crude prices at $70 to $80 a barrel, oil’s slump below $40 a barrel last month in New York hasn’t tempered Iran’s plan to restore output within months of sanctions being lifted, Zanganeh said. Iran and six global powers reached an agreement in July that would limit the Persian Gulf country’s nuclear program in return for removing sanctions on its energy and financial industries.
The U.S., Canada, Brazil and Russia — the biggest sources of supplies outside OPEC — face an array of technological and regulatory obstacles that will be compounded by the drop in crude prices, according to a preliminary draft of the long-term strategy report obtained by Bloomberg News. Some smaller U.S. shale drillers could be forced “out of business,” Brazil will face “extreme technological challenges,” and Russia’s best hope may be to prevent output declining, it said.
Source: Bloomberg
