Opec close to 'break-up' after oil talks fail
Thursday 09 June 2011
Opec was said to be on the point of "break-up" last night after a meeting of the world's biggest oil producers ended in disagreement over whether or not to raise output as the world economy struggles under the strain of soaring commodity prices.
The Saudi Arabian oil minister Ali al-Naimi – dubbed the world's most powerful oil minister owing to his country's vast reserves – said the Vienna gathering was "one of the worst meetings we have ever had".
Mr Naimi said seven of the cartel's 12 members had opposed a Saudi-backed proposal to raise Opec's output. He listed Algeria, Angola, Ecuador, Venezuela, Iran, Iraq and conflict-ridden Libya, whose delegate was reported to have arrived in the middle of the meeting via a basement garage at Opec's headquarters in the Austrian capital, as the dissenters. Kuwait, Qatar and the United Arab Emirates had backed the Saudi proposal, according to the minister.
The lack of consensus sent oil prices higher amid fears of a supply shortage. "If you look at demand, it will be very robust in the next months and there is a big need for extra Opec oil," Barclays Capital's analyst Amrita Sen said.
The demand trends were highlighted by the latest energy review from the oil giant BP, which showed that China became the world's largest energy consumer last year, overtaking the US, as the recovery in the world economy boosted consumption at a rate "not seen since the aftermath of the 1973 oil price shocks".
Marc Otswald, an analyst at Monument Securities, said "the interests of the individual [Opec] member countries have diverged very significantly," noting that Nigeria, which was not listed by the Saudi oil minister, was also likely to have been against raising output. "Opec is thus on the point of break-up," he added, noting that the biggest beneficiaries may well prove to be Russia and Kazakhstan.
The breakdown of the talks now leaves Saudi Arabia free to unilaterally raise supply. Ahead of the meeting, industry officials suggested that Riyadh could pump out an extra 500,000 barrels of oil per day, taking its total output to at least 9.5 million barrels per day. "The split in Opec doesn't really affect production plans," said the head of energy research at Deutsche Bank, Adam Sieminski. "In the short run, the Saudis have already said they're going to be increasing output. But what it does do is show the mess the decision making process is in."
The depth of the discord was apparent in Mr Naimi's comments after the meeting. Although he insisted that Opec's credibility had not been damaged by the lack of agreement, he said the Gulf Arab countries calling for an increase in output had faced stubborn opposition.
"We insisted 1.5 [million barrels per day] must be added to the 28.8 [million that is Opec's current production] to give us 30.3 million barrels per day. We spent three hours trying to convince them," he said. "In my past 16 years as oil minister I have not seen such an obstinate position."
Opec's secretary general, Abdullah el-Badri, said the cartel hoped to meet again in three months time to reconsider the issue – something that was called into question by the influential Saudi Arabian minister. "What was said [was] that we had a consensus to defer the meeting to three months from now – we had no consensus," Mr Naimi said.
A senior Opec delegate added that the failure to strike a deal on output meant the unravelling of the quota system put in place to regulate oil production across the cartel's members. "This agreement [to leave output unchanged] is not a rollover – it means death to the existing quota system, an invitation for countries to do any they want until the next Opec meeting," the delegate explained.
The failure to reach a deal was met with disappointment by the Paris-based International Energy Agency, which speaks for the big oil consumers in the West, and which has been warning about the economic risks posed by sky-high oil prices.
- 1 Barbarians vs Samoa interrupted by sprinklers as fans criticise lack of Wi-Fi and poor seating at West Ham's Olympic Stadium
- 2 Watch the Supermoon live: How to see the brightest Moon of the year tonight
- 3 Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
- 4 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
- 5 David De Gea to Real Madrid: Real finally get their man with £29m bid for Manchester United goalkeeper
Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
Watch the Supermoon live: How to see the brightest Moon of the year tonight
Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Turkey duped the US, and Isis reaps rewards
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...