There's something about Mr El-Badri

The predictable materialised yet again as OPEC held its quota at 30 million barrels per day following the conclusion of its 165th meeting of ministers. To be honest that's not what the Oilholic hit town for; quota situation was a done deal in most eyes!

In fact this blogger was wondering if we'll have some movement on the appointment of a new secretary general. Arriving in the Austrian capital last night, one heard whispers that Nigeria's petroleum minister Diezani Kogbeni Alison-Madueke was lobbying really hard for the post. Politics and merits aside, such an appointment – should it have happened – would have seen a welcome female Secretary General at the 12 member oil exporters' club.

As such, it turned out to be hot air, at least for this meeting. Instead, the 74 year-old Libyan industry veteran and current Secretary General Abdalla Salem El-Badri saw his term extended yet again. The latest extension takes him through to June 30, 2015 having been first elevated to the post on January 1, 2007. That's coming up to some record for holding the post.

In fact, by this blogger's calculation, the latest extension makes him the longest serving OPEC Secretary General of all time. The reason for the appointment extension is the same as it was at the last meeting, and the one before and so it goes. There is simply no compromise candidate that the two major camps, led by the Saudis and the Iranians can agree on. She might be lobbying hard for the post, but Alison-Madueke's quip to a newswire journalist about the Secretary General being "appointed by consensus" rings true.

And when there is no consensus, you ring for Mr El-Badri. That's what OPEC has done time and again for this powerful post of late. In more, ways than one, El-Badri is a real trooper and the ultimate compromise candidate. He exudes confidence, has a sense of humour, can tackle or swat down often awkward questions hurled at him by scribes, makes the best of an often bad situation and gets along with most.

The Oilholic remembers from his last outing to OPEC HQ when El-Badri was given an ironic round of applause by journalists to bid him farewell, full well in the knowledge that yet again OPEC had failed to name a successor. However, he maintained his sense of humour and went through the entire press conference without as much as a twitch.

Perhaps in appointing him back in 2007, OPEC raised the bar very high. Prior to his arrival at OPEC, the University of Florida educated El-Badri served as Libya's minister for oil and electricity. This was followed by several ministerial stints including one as deputy prime minister from 2002 to 2004.

After assuming the Secretary General's position, El-Badri handled some real challenges and a term that began with oil price first spiking above US$140 per barrel and then dipping below $40, followed by the worst financial crisis in modern history. That the current Secretary General has acquitted himself with distinction is beyond doubt, but time has come for him to move on.

In its repeated failure to name a successor, OPEC isn't doing itself any good. Meanwhile, the decision to reappoint El-Badri was unanimous. To give the last word to the man himself: "My reappointment as OPEC Secretary General was down to the wisdom of ministers and I have no further comment to make."

And there you have it. That's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2014. Photo: OPEC Secretary General Abdalla Salem El-Badri © Gaurav Sharma, June 2014.

The morning so far at Helferstorferstrasse 17

The scribes, the analysts, the bloggers and the camera crews are all bundled into the media briefing room as the 12 OPEC ministers begin their closed door proceedings for the 165th meeting of the OPEC conference. While an announcement on where the quota will be left at is expected at 14:00 CET, here’s what we know so far. Beginning with (who else) Saudi Oil Minister Ali-Al Naimi, the kingmaker opined this morning that the global oil market was ‘balanced’ at a media scrum.

 

Given all the years the Oilholic has been here, including a previous direct natter with the minister himself, that’s a clear indication that the quota will be staying at 30 million barrels per day (bpd). Elsewhere, those in the wider analysts’ community would perhaps like to know that Libya's man at the table is Omar Ali El-Shakmak, according to a last minute communiqué.

 

Finally, it is manifestly obvious here at Helferstorferstrasse 17 that Nigeria’s petroleum minister Diezani Kogbeni Alison-Madueke is trying to muscle in to the Secretary General’s chair long occupied by Libya’s Abdalla Salem El-Badri, as the organisation has failed to agree on a compromise candidate to succeed him so far.

However, Alison-Madueke has strongly denied lobbying for the position. "The Secretary General is appointed by consensus, not lobbying," she said ticking off a few forceful questioners from newswires.

As for the office stuff, El-Shakmak, who is also officiating as president of the present meeting, acknowledged the deceleration seen this year in the emerging and developing economies who are fast becoming the organisation’s biggest clients.

"India has continued to recover from last year's slowdown, but Russia, China and Brazil have experienced slower output for a variety of reasons. World oil demand is expected to grow by 1.1 million bpd to average 91.2 million bpd in 2014. The bulk of this growth is expected to come from non-OECD countries."

Non-OPEC oil supply is also anticipated to rise this year by 1.4 million bpd to reach 55.58 million bpd. "This growth will mainly come from North America and Brazil, while Norway, the UK and Mexico are expected to decline," El-Shakmak explained.

More importantly, the OPEC Reference Basket has remained fairly stable over the last two years or so, with annual averages ranging between roughly US$105 and $110 per barrel.

"In the past half-year, the Basket has averaged above $104 per barrel from January to May. This is a level that is acceptable to both producers and consumers," he concluded. Indeed sir. That's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2014. Photo: Media briefing room at the 165th OPEC meeting of ministers © Gaurav Sharma, June 2014.

The acknowledgement: OPEC flags-up US output

There should be no shock or horror – it was coming. Ahead of taking a decision on its production quota, president of the 164th OPEC conference Mustafa Jassim Mohammad Al-Shamali, who is also the deputy prime minister and minister of oil of Kuwait, openly acknowledged the uptick in US oil production here in Vienna.

 

“In the six months that have passed since the Conference met here in Vienna in May, we have seen an increasingly stable oil market, which is a reflection of the gradual recovery in the world economy. This positive development stems mainly from a healthy performance in the US, in addition to the Eurozone countries returning to growth,” Al-Shamali told reporters in his opening remarks.

 

It follows on from an acknowledgement by OPEC at its last summit in May about the impact of shale, which up and until then it hadn’t. But the latest statement was more candid and went further. “Non-OPEC oil supply is also expected to rise in 2014 by 1.2 million barrels per day (bpd). This will be mainly due to the anticipated growth in North America and Brazil,” Al-Shamali added.

 

You can add Canada and Russia to that mix as well even though the minister didn’t.

 

Turning to the wider market dynamics, Al-Shamali said that although the market had started to gradually emerge from the tough economic situation of the past few years, the pace of world economic growth remains slow. “Clearly, there are still many challenges to overcome.”

 

Finally, a few footnotes before the Oilholic takes your leave for the moment. Here is the BBC’s take why OPEC is losing control of oil prices due to US fracking – not entirely accurate but largely on the money. Meanwhile, Nigerian oil minister Diezani Alison-Madueke has just told Platts that her country supports OPEC’s current 30 million bpd crude output ceiling, at least for the next few months until the group's next meeting.

 

Alison-Madueke also said she was keen to see how OPEC saw the impact of the US shale oil and gas boom on itself. "We would like to see that we continue with volumes we have held for the last year or so at least between now and the next meeting. I think that would be a good thing. We would like to see a review of the situation referencing the shale oil and gas to see where we are at this stage as OPEC among other things."

 

Earlier, the Saudi oil minister Al-Naimi poured cold water over the idea of a production cut lest some people suggest that. He sounded decidedly cool on the subject at this morning's media scrum. So that’s three of the ministers saying the quota is likely to stay where it was. The Oilholic would say that removes all doubt. That's all from OPEC HQ for the moment folks, more from Vienna later as we gear up for an announcement! Keep reading, keep it ‘crude’! 

 

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© Gaurav Sharma 2013. Photo: OPEC media briefing room, Vienna, Austria © Gaurav Sharma 2013.

Final Thoughts From the 157th OPEC Conference

Alongside Thursday’s decision by OPEC to hold its official oil production target at 24.84 million barrels a day, i.e. the level set following a production cut in December 2008; the cartel also noted that global oil demand had dipped in two concurrent years; a situation unseen since the 1980s.

It bemoaned the “rollercoaster” ride in crude prices, particularly between Q4 2007 and Q1 2009. As usual speculators were blamed, with OPEC noting that oil had increasingly emerged as an asset class, with “excessive speculation adding appreciably to market volatility.”

It also appears that the cartel is irked by renewable energy initiatives or at least the talk of renewable energy. OPEC believes that the ambiguity of a number of energy and environmental policies, often with “evidently over-ambitious targets”, particularly in developed regions, has led to uncertainty in regards to future oil demand requirements.

The 158th OPEC conference would be held in Quito, Ecuador on December 11th, where the cartel hopes to publish its Long Term Strategy, as discussed by its 12 member nations here in Vienna on Thursday. Following that, OPEC would meet again in June 2011 in Vienna.

In a surprise move, it was confirmed Iran would assume OPEC presidency in January 2011; it last held the post in 1975. And last but not the least, there is finally a lady at the OPEC table – Nigeria's petroleum minister - Diezani Kogbeni Alison-Madueke, who having been a Shell executive took a certain amount of delight in telling the assembled press scrum that she had been in male dominated industries before and pretty much held her own!

To summarise, OPEC – in line with prevailing sentiment – noted that the market remains well supplied and given the downside risk to the global economy, did not feel the need to raise production.

That’s it from Vienna – time to say Auf Wiedersehen!

© Gaurav Sharma 2010. Photo: Nigeria's petroleum minister Diezani Kogbeni Alison-Madueke (Centre), © Gaurav Sharma, OPEC 157th Conference, Vienna, Oct 14, 2010

OPEC’s Own Version of He Said, She Said…

Over each of last three years, in the run-up to the cartel's meeting, OPEC Secretary Secretary General Abdalla Salem El-Badri has tended not to give very much away. However, the 157th summit seems to be different; for over the last 6-12 months El-Badri has often stated that OPEC is comfortable with the crude oil price. In fact, he gave quite candid comments in June.

That said the price has remained in the circa of US$75 to US$85 per barrel and is heading higher as the US dollar has weakened in recent weeks. So El-Badri should indeed be comfortable with it.

But of course, no OPEC summit is complete with a bit of the old 'he said, she said'. The most important “he” in question is the Saudi oil minister Ali Al-Naimi who plainly told a media scrum here in Vienna on Wednesday that, and I quote, "Everyone" is happy with the market. To the market that reads like a coded signal he is against increasing output.

The only "she" on the table is of course Nigeria's petroleum minister - Diezani Kogbeni Alison-Madueke – who said OPEC (as always) will be looking at overproduction and non-adherence to quotas, at "this particular conference."

Sheikh Ahmed al-Abdullah al-Sabah of Kuwait when asked how the price of crude was at the moment, gave a short and sweet reply. Quite simply, he noted that, “It’s good.” Concurrently, Venezuelan Energy and Oil Minister Rafael Ramirez told a local TV network that "all" his colleagues agree they should leave the level of production stable.

Since arriving in Vienna, based on the 'he said, she said' rounds, I have had a jolly good natter with eight analysts here and a further three in London. All 11, as well as those at Société Générale expect a rollover in OPEC quotas and no change to actual output.

Finally as the forward month ICE Brent crude contract bounced to the stop-loss at US$84.55, analysts at Société Générale also believe a further range bound market is possible. "According to OPEC, the recent price rally does not reflect oil fundamentals (and we agree)," they wrote in an investment note.

© Gaurav Sharma 2010. Photo: © Shell