The Organization of Petroleum Exporting Countries (OPEC) failed Thursday to reach a deal to limit output and stabilize global oil prices, although Saudi Energy Minister Khalid al-Falih promised not to suddenly increase production and set off another round of price cuts.
In spite of the deadlock, oil prices closed above US$50.00 per barrel yesterday for the first time in seven months.
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“There was no action, no surprise,” commented Michael Wittner, head of oil-market research at Société Générale SA in New York. “It was interesting to see that the Saudis were willing to talk about an overall ceiling, but Iran stuck to its party line and nothing came of it. The overall result is that things will be unchanged.”
“Saudi Arabia and its Gulf allies had tried to propose OPEC set a new collective ceiling in an attempt to repair the group’s waning importance. But Thursday’s meeting ended with no new policy or ceiling amid resistance from Iran,” Reuters reports.
In response, the tone from Saudi Arabia was conciliatory. “We will be very gentle in our approach and make sure we don’t shock the market in any way,” Falih said after the meeting. “There is no reason to expect that Saudi Arabia is going to go on a flooding campaign.”
Much of the session turned on tensions between Saudi Arabia and Iran, which is sharply increasing its oil production after years of crippling economic sanctions. But although there was no agreement on production quotas—and little expectation of a deal in the days leading up to the meeting—oil analysts saw the tone of the gathering as an improvement over an earlier round of negotiating in Doha, Qatar in April.
“After the Doha debacle, it actually restores market confidence that Saudi Arabia is committed to OPEC,” Amrita Sen of Energy Aspects told Reuters. “This is a success compared to three days ago, when people had been expecting Falih to walk out of the OPEC room.”