By Ruma Dubey
It was a night of drama at the OPEC meet yesterday night at Vienna. Bijan Namdar Zanganeh, the Iranian oil minister walked out of the meeting in a huff and puff. Russia and Saudi have recommended a supply boost while Iran held its stand that they will not back this output rise. Iran does have a veto power but it is unlikely that this veto could have any effect; Riyadh might act unilaterally to boost output or abandon the 2016 cuts deal entirely. Iran’s walkout shows the tension within OPEC and with USA, China and India urging it to increase production to curb the spiraling oil prices.
While we in India would be fast asleep with some waking up early, the OPEC Press Conference will get underway at 4.30am. It’s a crucial meet as the members are meeting to decide on the increase of output.
The early signs which have come from Vienna, indicate that despite Iran walking out, OPEC and its allies have reached a preliminary agreement to boost production by 1 million barrels per day (mbpd). But those in the know say that many OPEC countries might not be able to immediately raise the output. In all likelihood, even if they agree to boost production by 1 mbpd, the actual extra oil likely to flow would around 60,000 mbpd, what with Venezuela’s oil industry in a state of collapse and outside OPEC, Mexico also unable to increase production.
Saturday’s meeting will also be crucial. OPEC and non-OPEC members, mainly Russia, will hold a joint Press Conference at 4.30 am Sunday morning.
There are four possible outcomes of the OPEC meet:
- Despite Iran, led by Saudi, OPEC will go for a production boost – it would theoretically be 1 mbpd but actual would be around 60,000 mbpd.
- The OPEC meet could be complete washout with no decision but on the sly, ‘informally’, Saudi and Russia could quietly increase output.
- It is unlikely but has happened before – Iran could turnaround if OPEC agrees on a lower production hike. If Iran demands any criticism of USA by the OPEC members in their comminique on the issue of sanctions, that is unlikely to happen.
- Last but not the least, to keep everyone happy, it might go for a lower increase; the question is would it do that to keep Iran happy? Unlikely. When majority of the OPEC members and Russia are backing a 1 mbpd boost, why will Saudi compromise at all.
How do these OPEC meetings affect us? Nothing directly but psychologically, yes, it will impact. India is already on a fuel price hike mode and every one to five dollar rise, will result in a price rise here. But don’t expect sharp rate cuts; prices once up rarely come down. OMCs have turned in very good performances but from FY19, the tide could once again ebb.
The OPEC meet has no relevance for the man on the street. But as part of the fastest growing economy in the world, surely we need to be aware. It is knowledge alone which has the power to control access to opportunity and advancement.
OPEC MEMBERS – 14 COUNTRIES
Founder members – Iran, Iraq, Saudi Arabia, Kuwait and Venezeuala.
Other members – Qatar, Libya, UAE, Algeria, Nigeria, Ecuador, Gabon, Angola and Equatorial Guinea.
Other oil rich countries not members of OPEC – USA, Russia, Norway. That’s because they want to keep its own energy prices in line with world markets ad not become part of any cartel, where others dictate the price of their oil.