Don’t hold your breath for the “toothless tiger” that is the Organization of Petroleum Exporting Countries (OPEC) to seal a deal next week to limit oil production and curtail a global price crash now going into its third year.
That’s the conclusion of a Bloomberg survey of 23 industry analysts, only two of whom expect the once-mighty cartel to reach a supply management agreement when its members gather in Algiers. OPEC “faces the same internal rivalries that thwarted a previous agreement in April,” the news agency reports. “Iran and Iraq have signaled their resolve to increase output, while group leader Saudi Arabia is maintaining near-record supply.”
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Iran still considers it “vital” to make up the production it lost during years of economic sanctions, while Saudi Energy Minister Khalid Al-Falih “denied there was any current need to cap production, saying ‘markets are trending in the right direction.’”
The net result is that “OPEC has somewhat become a toothless tiger,” Tiberius Group CEO Christoph Eibl told Bloomberg TV. “The incentives for Saudi, for Iran are all the same: increasing output.”
Failed negotiations in Algiers may not be the end of the fossil industry’s pain, writes Nick Cunningham of Oilprice.com. “Next week OPEC might push down oil prices with a disappointing result from Algeria,” he notes. “But the problems for any oil price rally might only get worse from there. That is because more supplies are set to come online in the coming months.”
With Libya, Nigeria, and Russia all increasing production or already at record high outputs, analyst John Kilduff of Again Capital Partners said global oil prices are about to fall. “I mean, it’s just a joke,” he told CNBC. “I think we reach $40 [US$ per barrel] on the way down.”
