169th OPEC Meeting Memo: Key participants and issues
- What: 169th OPEC Meeting Recap
- When: June 2, 2016
- Where: Vienna, Austria
Khalid al-Falih, the newly appointed Saudi oil minister, moved oil prices when he indicated in advance of the meeting that Saudi Arabia could be open to an oil production compromise. To reporters prior the closed session, al-Falih indicated that he considered the oil market rebalanced, but that high inventories still need to be dealt with. Demand is still strong. His priority is to maintain long-term stability in the oil market and prevent any supply shocks, but the market is “doing quite well by itself.” However, he did say that it is “time to steward the market and encourage” rebalancing. He is most concerned with the decline in investment in new sources of production and indicated that Saudi Arabia has initiated a new drilling program in order to bring more supply flexibility to the market.
Bijan Namdar Zangeneh, the Iranian oil minister, plans to continue to increase Iranian production capacity over the next few months. He is less interested in a production ceiling, as he is in the reinstatement of oil production quotas. Iran would like to see a quota of 14.5% of OPEC market share, which is where Iran’s production was before the institution of sanctions. This would put Iranian production at about 4.7 million barrels per day.
Oil minister Eulogio Del Pino, would like to see oil prices rise to as high as they can go. He proposed that OPEC ministers consider an “oil supply range,” as opposed to a straight oil output ceiling. Some considered him a candidate for OPEC Secretary General, but with the instability of the Maduro government, Del Pino’s election to this post is unlikely.
Dr. Mohammed Barkindo is considered the front-runner for new OPEC Secretary General. With his tremendous experience is a compromise candidate that both Iran and Saudi Arabia can support. Libyan Abdallah Salem el-Badri is currently serving as acting Secretary General. Before the closed session, Iran’s Zangeneh told reporters that he had already promised Nigeria that he would support Barkindo.
This small African producer joined OPEC in 1975, but left in 1995 due to disagreements over Gabon’s oil production quotas. Gabon produces about 200,000 barrels of oil a day, which is 330,000 barrels less than OPEC’s smallest producer, Ecuador. Gabon’s application for readmission to OPEC will be considered at the meeting.
Also on the Agenda:
In addition to Gabon’s admission and the election of a new Secretary General, OPEC ministers will consider the long-term impact of declining investment and potentially returning to a production ceiling. Look for the results soon.