June OPEC Meeting

What To Expect From The OPEC Meeting

The month-long wrangling within the Organization of the Petroleum Exporting Countries OPEC over a date for its next meeting has highlighted a changing dynamic in the group. Decisions that are increasingly driven by longtime leader Saudi Arabia – in tandem with non-OPEC Russia – have been angering member state Iran. Consensus-building has never been easy within OPEC, which is composed of 14 Arab and non-Arab oil producers, some of which have deep rivalries. But tensions have grown as Iran has sought a bigger say, while its exports tumble due to United States sanctions and as a new Riyadh-Moscow axis has developed. OPEC sources say this means future meetings and decisions could be even more fraught.

OPEC members finally agreed on Wednesday to meet on July 1, followed by a meeting with non-OPEC states on July 2. This is a switch from the previously agreed dates of June 25 and 26.

‘Usually OPEC decides’

Agreement was reached after a tussle over timings that coincided with the rising tension in the Gulf over attacks on oil tankers in May and June. Washington and Riyadh have blamed Tehran for the attacks, which Iran has denied. OPEC sources said Russia was behind a suggestion to push the meeting back until after G20 talks due to be held in late June – a postponement that is backed by Saudi Arabia. “Some people might think the Russians were actually members of OPEC,” one OPEC source told the Reuters news agency, referring to Moscow’s increasing influence over the oil cartel, of which it is not a member. A second OPEC source told Reuters, “This has never happened before. Usually OPEC decides on a date and that’s it.” The original timing would have meant that the meeting would take place just before an end-of-June deadline for the expiry of a deal on output curbs that was agreed between OPEC and non-OPEC producers, an alliance known as OPEC+. The next gathering – in Vienna – will decide whether to extend that pact. “Iran is maybe upset about not having as much power over what happens,” another OPEC source told Reuters.

‘Towards collapse’

Iran, a founding OPEC state, has been pushed down the group’s production rankings as US sanctions imposed in a nuclear row have cut its crude exports to about 500,000 barrels per day (bpd) in May from around 2.5 million bpd in April 2018. US sanctions have also hurt Venezuela, another OPEC founding member whose economic problems had already sent its oil industry into free fall. Venezuela’s exports have continued to tumble – to below 800,000 bpd from well above 1 million bpd just last year. At the same time, exports from Iraq, an OPEC state that borders Iran, have climbed, while exports have also surged from the US, which is not party to the OPEC+ deal. OPEC – in conjunction with Russia and other non-OPEC producers – is now set to decide whether OPEC+ extends or adjusts the supply deal that involves cutting 1.2 million bpd. The deal has been implemented since the beginning of the year. Saudi Arabia and Russia, which together account for more than 40 percent of the oil produced by the OPEC+ group, have become the main protagonists of the global supply pact. But Riyadh’s close coordination with Moscow on OPEC affairs has rattled other parties involved. In comments widely seen as directed towards Saudi Arabia, Iranian Oil Minister Bijan Namdar Zanganeh said this month that some OPEC members had turned OPEC into a political hub against two other founding members, namely Iran and Venezuela. “I believe that these countries are taking OPEC towards collapse, but we want OPEC to be preserved,” he said, according to Iran’s Oil Ministry news agency SHANA. “These two countries will undermine this organisation by instigating infighting in OPEC.” Feuding between Saudi Arabia and Iran has often emerged at OPEC meetings, reflecting long-running hostility outside of the organisation. The two nations have been battling for years in what are seen as proxy wars across the Middle East.

The meeting of the Organization of the Petroleum Exporting Countries and its allies next Monday is coming at a particularly important and volatile time for oil.

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