OPEC fails to agree on production ceiling

Cartel meeting in Vienna last week ends in a deadlock after Iran insists it would not cut production

A file photo of an OPEC meeting.
A file photo of an OPEC meeting.

OPEC members failed to agree an oil production ceiling on Friday at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restores output scaled back for years under Western sanctions.

A final OPEC statement was issued with no mention of a new production ceiling.

"We have no decision, no number," Iranian Oil Minister Bijan Zangeneh told reporters after the meeting.

OPEC's secretary general Abdullah al-Badri said OPEC could not agree on any figures because it could not predict how much oil Iran would add to the market next year.

Most ministers left the meeting without making comments, according to Reuters.

Badri tried to lessen the embarrassment by saying OPEC was as strong as ever, only to hear an outburst of laughter from reporters and analysts in the conference room.

The last time OPEC failed to reach a deal was in 2011 when Saudi Arabia was pushing the group to increase output to avoid a price spike amid the Libyan crisis.

Friday's developments set up the fractious cartel for more price wars in an already heavily oversupplied market, with brent crude presently trading at around $43 a barrel.

A year ago, Saudi Arabia pushed though an OPEC decision to defend market share instead of cutting output, ultimately hoping to drive high-cost producers such as U.S. shale firms out of the market.

Many poorer OPEC members have said the group's largest producer was effectively twisting their arms, prompting the Saudi oil minister, Ali al Naimi, to say he would listen to everyone this time.

Iran had made its position clear ahead of the meeting with Zangeneh saying Tehran would raise supply by at least 1mn barrels per day (bpd) - or 1% of global supply - after sanctions are lifted. The world is already producing up to 2mn bpd more than it consumes.

Naimi earlier had said he hoped growing global demand could absorb an expected jump in Iranian production next year: "Everyone is welcome to go into‎ the market".

He made no comment after the meeting, Reuters reports.

Also during the meeting, OPEC welcomed back returning member Indonesia, its 13th member.

Initially on Friday there was no indication of a repeat of the 2011 meeting, which Naimi had called the ‘worst ever’.

OPEC sources told Reuters the ministers had agreed to roll over existing policies during the first couple of hours of deliberations. That involved raising the collective ceiling, excluding new member Indonesia, to 31.5mn bpd from the previous 30mn - effectively bringing it in line with real production numbers.

But later, all decisions appeared to have been overturned, leaving the group with no official policy. It was not immediately clear what happened behind closed doors.

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