Ministers from the Organization of Petroleum Exporting Countries (OPEC) left Vienna on Thursday, after the conclusion of the 169th meeting, congratulating each other for a successful meeting. Odd then that oil prices were down 3% when the meeting concluded from their high earlier in the day. So little was accomplished at the meeting in fact, that one can’t help but get the sense that this was the minsters’ overriding intention. Let the oil market continue on autopilot.
OPEC convened the meeting without any blueprint for how to stabilize the world’s oil market. Press rumors circulated early that the cartel was debating re-introducing the production ceiling that was scrapped last December, but this too was left out of the final press release. At the end of the day, no deal was struck and markets were left to find their own price equilibrium.
The cartel seems to be in a wait-and-see mode, letting dynamics in the oil market play out before making their next move. This was evident by reading their press release in which they say, “non-OPEC supply, in response to market dynamics, peaked during 2015 and started declining, with supply expected to further decline by 740,000 barrels per day (b/d) in 2016.” This expected non-OPEC production decline of 740,000 b/d is an upward revision to the 580,000 b/d figure the group cites in its May oil market report.
OPEC goes on to say, “crude oil prices have risen by more than 80%, supply and demand is converging … demand growth remains relatively healthy.” So with oil prices safely recovering, the ministers concentrated on more immediate business, like finding a new general secretary. This honor went to Nigeria’s Mohammed Barkindo, who now faces the task of uniting a still divided cartel.
The Bottom Line
OPEC never intended to accomplish much at this meeting. Expectations were pitched very low, not even attempting to salvage the wreckage of the Doha meeting in April where a plan was debated to freeze oil production at January 2016 levels. Instead, success was measured by no public discord, especially between Iran and Saudi Arabia. Time will show if OPEC needs to be more proactive at the 170th meeting.