OPEC+ announces deeper cuts of 500kbpd

It's official - OPEC+ has decided to "deepen its cuts" by ~500,000 barrels per day (bpd), thereby upping its output reduction from 1.2 million bpd, 1.7 million bpd.

And if the new chief OPEC powerbroker Prince Abdulaziz bin Salman is to be believed, and every participant well...err....participates, the market could well be looking at a real terms cut of 2.1 million bpd. 

That is wishful thinking and will be severely tested as the Saudis say OPEC+ compliance would be keen monitored. To this effect, OPEC will have an extraordinary meeting of ministers in March 2020, on top of its regular meeting in June. 

For its part Saudi Arabia will up its cuts "voluntarily" to 400,000 bpd (+167,000 bpd) bringing its headline production down to 9.744 million bpd. Errant Iraq has promised to cut 50,000 bpd. Nigeria, Libya and Iraq remain exempt, but Nigerian Minister Timipre Marlin Sylva said his country would be cutting production "voluntarily."

There seems to be no shortage of volunteers. Here are two other key quotes:

• "Signal we want market to take is that we are collectively showing readiness to rebalance the market, prevent heavy inventory buildup in Q1 2020," - Abdulaziz bin Salman.
• "Russia wants to avoid any oil market turbulence in 2020. We are not concerned with US shale, seeing signs of shale slowdown," - Russian Oil Minister Alexander Novak. 

Finally, the Saudi Minister sounded pretty peeved about getting a "battering from the media" about the Saudi Aramco IPO, adding that the company's valuation would hit $2 trillion very soon. And that's that; more composed thoughts upon the Oilholic's return to London, but that's all for the moment from OPEC folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: Saudi Oil Minister Abdulaziz bin Salman speaks at the conclusion of the OPEC+ meeting in Vienna, Austria © Gaurav Sharma December 6, 2019.

On OPEC discipline & deepening cuts

The Oilholic is back in Vienna, Austria for the 177th OPEC Ministers' meeting and their (now) regular haggling with 10 Russian led non-OPEC producers who've signed up to a collective cut of 1.2 million barrels per day (bpd).

With the cuts set to expire in March and the oil price nowhere near $70 per barrel using Brent as a benchmark, there is chatter here of deepening the cuts.

Ironically, these are being flogged to the media and analysts by Iraq; the one OPEC member that has hardly complied with its share of the cuts. However something is definitely afoot at Helferstorferstrasse 17. The reasons being a paucity of leaks, few unscheduled remarks, Iranians keeping mum despite being tetchy, and the media / analysts not being allowed "access to ministers" before their opening remarks to the conference, i.e. no "gang bang", only a "speech listening" at more than an arm's length. 

Most unusual level of discipline being shown by #OPEC ministers, sources, no leaks, 2 of my oldest sources keeping mum. Additionally, media/analysts will not have "direct access" to ministers at opening session. Is a deeper #oil production cut coming? #OOTT #oilandgas pic.twitter.com/zSrG3moK3E

— Gaurav Sharma (@The_Oilholic) December 5, 2019

From that has emerged the "deepening of cuts" figure of 500,000 bpd. Of course, no details have been provided, especially on the level of Russian compliance. Apparently the likes of Nigeria and Iraq would be squeezed to fall in line too, according to the rumour mill.

What's more is this 500,000 bpd cut a "paper adjustment" with compliance current over 140% or is the cut being upped to 1.7 million bpd? Not too sure, not convinced as convincing answers are not forthcoming.

And will that even work? The Oilholic seriously doubts it; simply because 2-2.5 million bpd of non-OPEC supply growth is expected next year, and there are deep rooted concerns over demand, as noted on Forbes. Still the OPEC show goes on, and we'll probably have some finality after the OPEC+ meeting concludes tomorrow (Dec 6). 

That's all for the moment from Vienna folks, but there's more to follow. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: Media briefing room at OPEC's 177th Ministers' Meeting in Vienna, Austria on December 5, 2019 © Gaurav Sharma, 2019

Giving OPEC 176 a miss, but not Vienna

As far as OPEC meetings go, the Oilholic hasn't missed a single one since 2008. Alas, the run had to come to an end at some point and the 176th OPEC Ministers Meeting on July 1-2 will be that point. 

However, it is not for lack of trying. In farcical circumstances, OPEC postponed the meeting twice, from April to June to finally the stated July date. Other business, family and personal commitments, as well as business meetings already penned in Vienna around OPEC's June dates (of June 25-26) could not be rearranged for a second time running. 

Hence, the Oilholic found himself in the Austrian capital the week before with the rare luxury of not having to spend most of his time camped at OPEC's hub of Helferstorferstrasse 17. Instead, a stroll past Katholische Kirche St. Peter (St. Peter's Catholic Church) nearby admiring its entrance in 35 C sunshine was a nice short distraction from 'crude' matters this week. 

Nevertheless, and not to digress, this blogger does not believe he will be missing anything too dramatic. A rollover of OPEC's ongoing 1.2 million barrels per day (bpd) cuts along with 10 Russia-led non-OPEC producers is more or less guaranteed. Not least because the organization lacks a clear exit strategy for the cuts, as one opined on Rigzone. 

If OPEC ditches the cuts, the result would be bearish for the oil market. If it expands the cuts, the result would be bullish over the short-term, only to boost further non-OPEC production accompanied by a subsequent bearish drag further down the line. 

Fellow industry analysts, academics and researchers the Oilholic interacted with here in Vienna are of a similar mindset; and inventory rebalancing – the official line for instituting the cuts – remains as rocky as ever while OPEC continues to bleed market share as it produces fewer barrels.

Data aggregators say OPEC production is at its lowest since in quite a while. According to a Reuters survey, OPEC pumped 30.17 million bpd in May, down 60,000 bpd from April and the lowest output total on record since 2015. 

The Oilholic expects at least a six-month rollover at the stated cuts level of 1.2 million bpd with Saudi Arabia, as usual, carrying most of the burden. At some point, something has got to give. However, the July 1-2 summit will not be that point.

Away from OPEC chatter, the Oilholic also visited Austrian giant OMV's imposing headquarters in Vienna to discuss market permutations, the evolving global fuel mix and the company's take on the energy landscape.

More on that to follow shortly but in the meantime, here is a conversation on Forbes’ behalf with David Gilmour, boss of BP Ventures, the oil giant's venture capital funding arm that's looking to future proof the FTSE 100 company.

That's all from Vienna folks. Some post-OPEC analysis to follow from London next week! Keep reading, keep it 'crude'!

Addendum I (30.06.19): Upon his arrival in Vienna, well before the OPEC meeting has even begun Saudi Oil Minister Khalid Al-Falih has already said he is in favour of a “6 to 9 month” rollover of the output cut, and preferably "9 months."

Addendum II (30.06.19): Remember that bit about risking market share, well here’s some analysis by Bloomberg, ahead of the ministers’ meeting suggesting that OPEC’s output is on track to slide below 30% of the global market share for the first time in three decades. Q.E.D. 

Addendum III (30.06.19): OPEC members’ compliance rate with oil production cuts stood at 163% in May, according to S&P Global Platts. 

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© Gaurav Sharma 2019. Photo 1: Katholische Kirche St. Peter. Photo 2: Headquarters of OMV, Vienna, Austria © Gaurav Sharma, June 2019.

OPEC's Friday numbers game

So here we are back again at Helferstorferstrasse 17 on Friday (December 7), for another packed room at the "5th OPEC and non-OPEC Ministerial Meeting." That's after having received no formal announcement on the level of OPEC cuts overnight at the "conclusion" of the 175th OPEC Ministers Meeting, and Saudi Oil Minister Khalid Al-Falih having told CNN a deal on a production cut may not materialise. 

The morning after extreme volatility in the oil markets, OPEC's numbers game continues. The latest that multiple sources seem to suggest is that OPEC is inclined to cut 650,000 barrels per day (bpd), and non-OPEC countries another 350,000 barrels per day, all tallying up to a possible 1 million bpd cut proposed overnight. 

Question is - will the market be convinced, especially if Iran and a few smaller members decline to participate? The Oilholic doesn't think so (and Iran continues to play hardball and the formal OPEC /non-OPEC meeting has not even begun yet @12:46 GMT). 

To support a $70 oil price, a 1 million bpd cut won't do, but may serve to de-risk a huge decline. Anything above that appears unlikely. We wait and see! More from Vienna soon. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2018. Photo: OPEC Media Briefing room, Vienna, Austria, December 2018 © Gaurav Sharma 2018

OPEC’s new deal: Fudgy math or fuzzy stats?

The deed is done and not a single Iranian appeared visibly riled in the end. Following the conclusion of OPEC's 174th Ministerial Meeting on Friday here in Vienna, Austria, the cartel announced a 'nominal' production hike of 1 million barrels per day (bpd).

But the futures market expected more and has gone into full bullish mode as the weekend approaches. At 18:32pm BST on Friday, the WTI front-month futures contract was at $68.77, up $3.23 or +4.93% and Brent was at $74.88, up $1.83 or +2.51%.

Both benchmarks more than recovered their overnight declines, as traders who – like the Oilholic – delved into the OPEC statement, encountered some real fudgy math or perhaps fuzzy stats. It seems all what OPEC has done is "insist" on 100% compliance with a 1.2 million barrels per day (bpd) cut it put forward in November 2016. 

The cartel's claim is that some of its members 'overcut' due to their own enthusiasm, or due to circumstances, geopolitics or lack of investment (Latter cases to be read as Libya, Nigeria and Venezuela). 

According to OPEC, this meant that compliance with the cuts touched 152% in May, instead of 100% or 1.824 million bpd. So now all OPEC has asked its members to do is bring compliance down to 100%, or put 624,000 barrels back on to the market and not a million! 

Of course, as has become the norm for over a decade now, OPEC did not reveal which individual member will do what and who is or isn't partaking in the exercise. That's the compromise to keep Iran onside for the moment. Here is one's Forbes piece for a more detailed perspective; but it is a jolly old fudge here at Helferstorferstrasse 17.

And oh, by the way, Congo's request to join OPEC has been accepted. So, if there's an OPEC-Plus or a Super-OPEC, it'll have 25 members to begin with. That's all from Vienna for the moment folks! More tomorrow when OPEC chats to its 10 non-OPEC counterparts.Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2018. Photo: Opec Secretariat, Vienna, Austria © Gaurav Sharma 2018

'R-OPEC' or OPEC? All about Russia at Helferstorferstrasse 17

The Oilholic has negotiated some serious snowfall to arrive at Helferstorferstrasse 17, OPEC's secretariat in Vienna, Austria for the 173rd OPEC Ministers' meeting. 

The winter wonderland that the Austrian capital has transformed into overnight should make the Russians feel right at home. That's because all the soundbites here are about the Russians, and what they may or may not agree to this time around. 

The collective OPEC and non-OPEC production cut, pegged at 1.8 million barrels per day (bpd) in May, is valid until March 2018. So the question is a simple one where from here? The Gulf exporters led by Saudi Arabia want a nine month extension beyond that to cover most of 2018. However, Russian oil minister Alexander Novak is not so keen on the idea, questioning why OPEC wants to extend a deal that is yet to expire.  

Here's some overnight analysis for Forbes. Sooner or later Russia will part company with OPEC and the many in the market are cognizant of that.

And here's the first report from OPEC for IBTimes UK. Plenty more from here soon, but that's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2017. Photo: View of snowfall on Westbahnhof / Europaplatz, Vienna, Austria, November 30, 2017. 

Two summits, one 'crude' venue

Holy mackerel! Was there an almighty crush, or was there an almighty crush getting into Helferstorferstrasse 17 this morning. 

So many scribes and analysts, or in the case of yours truly, those who wear both hats, trying to get in before the whole jamboree began. 

Not bad for a place struggling to get this crude world's attention, according to some, to attract so many people. Of course, it’s not a regular occurrence that non-OPEC Russia’s Energy Minister and the Saudi Energy Minister hold a joint press conference after an OPEC ministers’ meeting ends; that's exactly what is on the agenda today. In the morning we’ll have the OPEC ministers’ meeting and then in the afternoon, we will have the OPEC and non-OPEC ministers’ meeting.

So here's to more than 150 of us all trying to get that elusive crude exclusive, including, if the Oilholic may add, quite a few Russian journalists here to cover the 2nd OPEC and non-OPEC ministers meeting after the 172nd OPEC meeting ends. 

And if you were in any doubt whether or not, its a done deal here, Saudi Oil Minister Khalid Al-Falih has said Opec's plan was to "stay steady" and go through the next nine months of oil production cuts. (Here's the full report). 

"The drawdown of inventories has clearly begun. OPEC and non-OPEC producers will work to bring inventories down to 5-year averages," Al-Falih added, saying he looks forward to working with non-OPEC colleagues.

That's all from Vienna, for the moment folks! More shortly! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2017. Photo: Media Scrums at OPEC Secretariat, Vienna, Austria © Gaurav Sharma 2017. 

Seems to be a done deal at OPEC

The Oilholic is back in Vienna, Austria for the 172nd OPEC Ministers meeting, and this blogger's 10th year of covering 'crude' matters. Oh how time flies! 

However, on this occasion, it looks like a done deal here at Helferstorferstrasse 17, even before things have begun. 

Crude sources suggest Opec's ministerial committee has proposed an extension of output cuts ahead of a formal announcement on the matter. Here's one's IBTimes UK report on the matter. 

The source also suggested that leading oil market power brokers Saudi Arabia, Iraq and Russia have given the proposal their backing. Meanwhile, non-Opec producer Oman has said it is "not opposed" to the deal, but was seeking "more clarity and discussion" on the matter, according to newswire Reuters.

Elsewhere, the Kuwaitis are wondering if a 12-month extension to cuts was worth contemplating, something the Saudis and Russians would probably not agree to.

At 2:58pm BST, both oil benchmarks were broadly flat staying close to overnight ranges, with the Brent front-month contract at $54.24 per barrel, up 0.17% or 9 cents, and West Texas Intermediate up 0.02% or a cent at $51.46 per barrel.

Opec's formal announcement is expected at 4pm BST on Thursday. That's all for the moment from Vienna folks. Keep reading, keep it crude! 

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© Gaurav Sharma 2017. Photo: OPEC secretariat, Vienna, Austria © Gaurav Sharma 2017.

OPEC agrees output cut of 1.2m bpd to 32.5m bpd

OPEC has agreed to cut production by 1.2 million barrels per day (bpd) to 32.5 million bpd at the conclusion of its 171st meeting of ministers. If carried out from January, this would be its first cut in eight years.

The oil futures market, which registered a slump of 4% overnight, rallied in response registering a rise of over 8%. 

However, the crude reality is that much of the above cut - i.e. 486,000 bpd - will come from the Saudis. As the Oilholic's report for IBTimes UK outlines, others will pitch in too. OPEC also said it would be counting on 600,000 bpd of non-OPEC cuts, bulk of which would come from Russia. That's where the real riddle is. What sort of compliance will we see from Russia? 

Furthermore, what about internal compliance within OPEC?  Mohammed Bin Saleh Al Sada, Qatar's Minister of Energy and Opec President, said a ministerial monitoring committee chaired by Kuwait, along with Venezuela and Algeria would be established to monitor the cuts.

Al Sada also described the decision as "historic" adding that: "We have no regrets about not having cut production in the summer of 2014. Opec has reacted to current oil market realities in taking this decision and delivered on what we agreed in September [at the International Energy Forum in Algiers]. 

More from Vienna shortly folks, once yours truly has digested this crude bit of news! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2016. Photo: Mohammed Bin Saleh Al Sada (left), Qatar's Minister of Energy and Opec President unveils an oil production cut of 1.2m barrels per day at the conclusion of its 171st meeting of ministers' in Vienna, Austria on 30 November, 2016. © Gaurav Sharma, November 30, 2016.

He’s making an inventory, checking it twice...

Full of festive cheer, he’s making a crude inventory, checking it thrice, gonna find out whose Iranian (sorry naughty) and nice – Saudi oil minister is coming to town. Nah, not really! 

For what it’s worth Khalid Al Falih actually turned up pretty late on Tuesday, just on the eve of the 171st OPEC Ministers' meeting. Having initially told a Saudi newspaper, an Opec production cut may not be needed, speaking at a pre-conference media scrum, Al-Falih said a deal could be done and would need wider cooperation within OPEC.

Separately, Suhail Al Mazroui, oil minister of the United Arab Emirates, told yours truly, for an IBTimes UK interview, that the ongoing OPEC meeting was not a make or break scenario for the oil market.

Al Mazroui admitted the last few months had seen “intense” negotiations, but added that: "However, from all signs I have seen, things are positive." 

We shall see. The Oilholic believes a final decision would go right down to the wire, and puts the chance of an agreement only at 50%. Watch this space! More from Vienna shortly folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma, November 2016. Photo: Khalid Al-Falih, Oil Minister of Saudi Arabia, speaks to reporters at the 171st OPEC Ministers' Meeting in Vienna, Austria on 30 November, 2016 © Gaurav Sharma, 2016.

A right royal ‘crude’ scrum

The Oilholic is back at Helferstorferstrasse 17, the OPEC secretariat in Vienna, Austria for its 171^st meeting of ministers, and boy did a fair few scribes turn-up for this one. 

In the considered opinion of yours truly, there haven’t been that many analysts and media people registering for the event since US President George W. Bush called on OPEC to cut production when the oil price was lurking around $147 per barrel in 2008 before it slid below $40 per barrel. Thankfully, the inmitable Jason Schenker, President of Presitge Economics was on hnad to provide some delightful company and some market insight.

Testing times always attract more scribes! Though this humble blogger as many of your recollect has almost, always turned up in what is now coming up to 10 years. More from Vienna shortly folks! Keep reading, keep it ‘crude’!

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Crude oil tumbles as OPEC stumbles

Having been to every single OPEC ministers’ summit since 2008, the Oilholic thought he’d seen it all. Not quite it seems; when the 168th meeting of ministers ended – for the very time since yours truly had been here, the oil producers collective failed to mention its production quota. Here’s a link to the communiqué on December 4, that's historic for all the wrong reasons!

In farcical fashion the market was left guessing what OPEC’s actual production is based on previously published data and anecdotal evidence. OPEC itself puts the quota at 30 million barrels per day (bpd). Until recently, while Saudi Arabian production was in overdrive, 31.88 million bpd was the industry consensus, and barely days before the OPEC meeting convened a Bloomberg survey put the figure at 32.1 million bpd.

Bulk of the incremental OPEC barrels are coming from Saudi Arabia and Iraq, with discounting by all 12 members in full swing, as the Oilholic wrote on Forbes. Now Iran, eyeing a meaningful return to the international fold, is also not in favour of production cuts, unlike on previous occasions. It is not just the analyst community that is in uncharted waters, the producers’ group itself appears to be pretty dazed.

OPEC has not published a target oil price since 2004. Then in December 2008, it ceased publication of individual members’ quotas leaving the market to second guess the figure. All we know is that Iraq and Libya are currently not included in the headline quota. Now it seems OPEC will not even reveal what its daily production target is. It is all pretty strange and quite unlike any cartel in the world, if you feel OPEC should be described as such.

No slide rule or calculator was required in working out the stalemate in Vienna would be short-term bearish! There’s just too much oil in the market. In fact, latest surveys suggest we are seeing nearly 2.6 – 2.9 million bpd of surplus oil, double of 1.3 million bpd estimates earlier in the year.

At this rate it would be well into 2016 before supply adjustment occurs, which means that oil price will remain in lacklustre mode. Only saving grace is that a steep decline for Brent below $40 per barrel was not a high probability unless there is a global financial tsunami; even though the global proxy benchmark did briefly fall below the 40-level in intraday trading today.

Expect an uptick next year, but the undeserved oil price heights of Q1 2014 won’t be touched anytime soon. That’s all from Vienna folks. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo: OPEC Secretary General Abdalla Salem El-Badri (right) at the conclusion of the 168th OPEC Ministers Summit in Vienna, Austria on December 4, 2015 © Gaurav Sharma / Oilholics Synonymous Report, December 4, 2015.

OPEC quota where it was, no figures needed

OPEC decided to roll over its 'previous quota' published at 30 million barrels per day, but declined to put a figure in its official communique issued at the conclusion of its 168th ministers' meeting in Vienna, Austria.

Despite repeated questioning on the quota ceiling, OPEC Secretary General Adalla Salem El-Badri said Indonesia's re-entry into the OPEC fold, additional Iranian barrels entering the market and concerns over economic growth meant putting forward a quota figure needed further consideration.

"OPEC will wait and see how the market develops" over the next six months and saw no need to alter the current production level during a period of market adjustment, he added, having been asked to stay on as "acting" Secretary General until July 2016. 

In wake of the OPEC announcement, at 1656 GMT, WTI was trading at $40.47 per barrel, down 61 cents or 1.48%, while Brent came in at $43.52, down 32 cents or 0.73%. Industry surveys suggest OPEC's production for November was at 32.1m bpd, well in excess of stated levels. More shortly! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2015. Photo: OPEC logo © Gaurav Sharma.

No change at OPEC, 30mbpd is the 'official' quota

It was over in a jiffy – that’s the best explanation one can come up with. So the OPEC ministers arrived at 10am CET, did their customary presser, opening note came in, sandwiches followed (nothing worse than keeping analysts and scribes hungry) and then time slot for the formal quota announcement kept getting revised from 1600CET to 1530CET to 1430CET. Before you knew it – in came Secretary General Abdalla Salem El-Badri at 1400CET to convey what everybody had already factored in, the ‘official quota’ stays at 30 million barrels per day (bpd).

Official quota in inverted commas because we all know OPEC is pumping way more than that. Surveys suggest that between the 12 member, the exporters’ collective led by Saudi Arabia is producing over 31.5 million bpd. Even OPEC’s official monthly report from April put production at 30.93 million bpd. With demand tepid and the oil price neither here not there, but better than January, where was the incentive to change, as one opined last month.

In fact, the Oilholic is getting quite used to filing an end of conference blog post from here titled “no change at OPEC” often followed by “in line with market expectation”. Quite like the 166th meeting, that number 167 followed the recent norm was hardly a surprise. Perhaps they'd had enough of each other at OPEC International Seminar which came before the meeting. 

But as one’s good friend Jason Schenker, President of Prestige Economics, says “Oil has always been a story of demand”; El-Badri & co. saw tepid demand and responded leaving production as it was.

OPEC is indeed forecasting world oil demand to increase in the second half of 2015 and in 2016, with growth driven by non-OECD countries. But nothing quite like what it was in 2014.

There was one rather intriguing development, for according to El-Badri it seems we’ve all got it wrong. The so-called, OPEC production quota, it turns out isn’t a quota at all. "It is not a quota as such, but rather a recommendation given to members which we expect them to take," said the longstanding Secretary General.

He also said OPEC in fact had no target price, when asked if the Iranians' opinion that US$75 per barrel would be adequate was a view he shared.

“OPEC does not have a so-called oil price target. I agree that there are income disparities within OPEC. We have rich oil exporters and poor oil exporters; our decision in November [to hold production] as well as what we have decided today is in the interest of all members.”

On the supply side, non-OPEC growth in 2015 is expected to be just below 700,000 barrels per day, which is only around one-third of the growth witnessed in 2014. That's all from Vienna for the moment folks. Keep reading, keep it ‘crude’! 

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© Gaurav Sharma 2015. OPEC Secretariat, Helferstorferstrasse 17, Vienna, Austria © Gaurav Sharma

Internal wrangles see OPEC quota left at 30mbpd

Some wanted a production quota cut; others didn’t and in the end it all bottled down to what the Saudis wanted – a rollover of the level set at 30 million barrels per day (bpd) since December 2011. So as the 166th meeting of OPEC ministers ended, Al-Naimi departed Helferstorferstrasse 17 - OPEC's HQ in Vienna, Austria having got his wish.

Had a cut been enforced and the Saudis not respected the agreement, it would have been meaningless. So the announcement did not come as much of surprise to many analysts, yours truly including.

For a spot report, you are welcome to read the Oilholic’s take on Forbes and the ‘longstanding’ Secretary General Abdalla Salem El-Badri’s jovial press conference explaining why the cartel acted as it did in the interests of “market equilibrium and global wellbeing”.

Rather calmly, OPEC has also suggested it would hold its next meeting in June as normal and extended El-Badri’s term until December 2015. But the Oilholic suspects a US$60 per barrel floor would be tested sooner than most expect. Will an extraordinary meeting be called then? Will OPEC let things be until it meets again June? What about Venezuela, Iran and Nigeria who will leave Vienna thoroughly dissatisfied?

It is indeed credible to assume that OPEC will grin and bear the oil price decline in the interest of holding on to its 30% share of the global crude markets for the moment. But for how long as not all are in agreement of the decision taken today?

Barely minutes after El-Badri stopped speaking, Brent shed a dollar. Within the hour it was trading below $73 a barrel while the WTI slid below $70. We’re now formally in the territory where it becomes a game of nerves. For the moment, none of the major oil producing nations, both within and outside OPEC, are willing to cut production even when demand for oil isn’t that great.

Should bearish trends continue, will someone blink first? Will finances dictate a production decline for someone? Will some or more of the producers come together and take coordinated action with OPEC?
These are the million barrel questions!

The latter option was attempted in Vienna bringing the Russians and Mexicans to the table, but the Saudis ensured it didn't succeed. The next four months ought to be interesting. On that note, it's good night from OPEC HQ. Analysis and a post mortem to follow over the coming days, but that’s all for the moment folks! Keep reading, keep it ‘crude’! 

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© Gaurav Sharma 2014. Photo: Abdalla Salem El-Badri speaks at the 166th OPEC Ministers’ meeting in Vienna, Austria © Gaurav Sharma, November 27, 2014

OPEC grapples with a buyers’ market

It’s been a long six months between OPEC meetings with the oil price slipping almost 35% since June and the organisation's own average monthly basket price of 12 crude oils dropping 29%. 

Returning to Vienna for the 166th OPEC Meeting of ministers, the Oilholic finds his hosts in a confused state. It’s not only a case of “will or won’t” OPEC cut production, but also one of “should or shouldn’t” it cut.

As yours truly wrote in his regular quip for Forbes – the buyers’ market that we are seeing is all about market share. That matters way more than anything else at the moment. Of course, not all of OPEC’s 12 member nations are thinking that way at a time of reduced clout in wake of rising non-OPEC production and the US importing less courtesy of its shale bonanza. For some, namely Iran, Venezuela and Nigeria – the recent dip is wreaking havoc in terms of fiscal breakevens.

For them, something needs to be done here and now to prop up the price with a lot of hush-hush around the place about why a cut of 1 million barrels per day (bpd) would be just the ticket. Yet there are others, including Kuwait, UAE and Saudi Arabia who realise the importance of maintaining market share as they can afford to.

Just listen to the soundbites provided by Saudi oil minister Ali Al-Naimi. The current problem of “oversupply is not unique” as the market has the capacity to stabilise “eventually”, he’s said again and again in Vienna, ahead of the meeting over umpteen briefings since Monday. And if the Saudis don’t want a cut, it’s not going to happen.

Secondly, as this blogger has said time and again from OPEC – in the absence of publication of individual quotas, even if a cut materialises how will we know it’ll not be flouted as has often been the case in the past? In fact, it’ll be pretty obvious within a month who is or isn’t sticking to it and then the whole thing unravels. Perhaps enforcing stricter adherence would be a good starting point!

Finally, only for the second time in all of one’s years of coming to OPEC have there been so many external briefings by all parties concerned and that number of journalists attending the ministers' summit.

To put things into perspective, while the Oilholic has been here for every OPEC meeting since 2007, more than twice the usual number of analysts and journalists have turned up today indicative of the level of interest. I think the extraordinary meeting in 2008 was the last time such a number popped into town.

All were duly provided with plenty of fodder to begin with as Saudi Arabia met with Russia, Venezuela, and Mexico to “discuss the oil market” and establish a “mechanism for cooperation” to cite Venezuelan oil minister Rafael Ramirez.

While everyone talked the talk, no one walked the walk with the mini meeting ending in zero agreement. It’d be fair to say the Saudis have kept everyone guessing since but Russian Energy Minister Alexander Novak expressed scepticism whether OPEC would cut production from its stated 30 million bpd level. 

On the sidelines are plenty of interesting headlines and thoughts away from the usual “oil price falls to” this or that level “since 2010”. Some interesting ones include – French investigation of Total’s dealings in Iran is still on says the FT, Reuters carries an exclusive on the chaos over who’ll represent Libya at OPEC, why Transportation ETFs are loving cheap oil explains ETF Trends, Bloomberg BusinessWeek says Iran is still pitching the 1 million bpd cut idea around and after ages (ok a good few years) the BBC is interested in OPEC again.

Additionally, IHS says US production remains healthy while Alberta's Premier says falling oil prices won't cause oil sands shutdowns. That’s all from Vienna for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2014. Photo: OPEC signage at headquarters in Vienna, Austria © Gaurav Sharma

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.