OPEC keeps status quo after failing to agree on output cap

Oil extends slide as members decide against production ceiling

An OPEC flag sits on a table ahead of the 169th Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Thursday, June 2, 2016 (Getty)

OPEC will stick to its policy of unfettered oil production after members failed to agree on a new output ceiling. Crude extended its decline in London.

The meeting didn’t produce a supply accord but did reach consensus on appointing Nigeria’s candidate as new secretary-general, Sudirman Said, Indonesia’s energy minister, said in Vienna.

The Organization of Petroleum Exporting Countries’ de facto leader, Saudi Arabia, had previously discussed restoring a production target scrapped in December, according to delegates familiar with the matter.

Oil has rallied about 80 per cent from the 12-year low reached in January as depressed prices take their toll on supplies. That suggests the Saudi-led decision in 2014 to maintain output amid a global glut is finally paying off, with higher-cost producers cutting back.

While Saudi Arabia had shown willingness to mend divisions Thursday with cash-strapped members demanding a new group ceiling, Iran said it would only support individual country quotas that would be difficult to agree in a single meeting.

Iran has rejected any cap on production as it restores output following the removal of sanctions in January.

The country’s refusal to participate in a production freeze proposed earlier this year prompted Saudi Arabia to block a deal between OPEC and Russia in April.

Crude Drops

Although OPEC regularly ignores its own output targets and there was no suggestion anyone would cut production, even a token gesture could have showed renewed unity and boosted prices. Brent crude dropped 61 cents to $49.11 a barrel at 2.22 pm. in London.

Nigeria’s Mohammed Barkindo will assume the role of secretary-general, succeeding Abdalla El-Badri, who has been in the job for nine years. Barkindo was acting head of OPEC in 2006 and previously ran Nigerian National Petroleum Corp.

His appointment demonstrates that OPEC has at least overcome squabbles that scuppered consensus on the top job at previous summits. El-Badri, a 76-year-old Libyan, was originally due to step down in 2012 after serving the maximum two terms, but members weren’t able to agree on a replacement and his tenure was extended at successive meetings.

Barkindo, whose rival nominees for the job included Indonesia’s Mahendra Siregar, spent more than 23 years at NNPC, where he served in various capacities including deputy managing director of Nigeria LNG and head of the international trading unit. He also served for 15 years as Nigeria’s national representative to OPEC.

© 2016 Bloomberg L.P