Saudi Arabia's Kingdom Tower/Bloomberg
Oil prices have slid about 16 per cent from a high in April 2019 even as the 24-nation coalition has cut production to cheque the glut threatened by faltering demand and surging US shale oil.
Sunday 15, September 2019
Since the launch of its strategy to revive global oil markets three years ago, one of the biggest challenges faced by OPEC and its allies is that not all the producers have pulled their weight, reported Bloomberg.
In the subtle diplomacy of Saudi Arabia’s new energy minister, they may at last have found a solution.
A big part the Organisation of Petroleum Exporting Countries and their allies’ (OPEC+) struggle has been that some producers in the accord, most notably Iraq and Nigeria, have ramped up output rather than reduced it as promised.
A meeting of the group in Abu Dhabi last week signalled they intend to turn the page, officials from both errant countries solemnly assured their colleagues they will meet their commitments in full.
While Iraq and Nigeria have promised in the past to mend their ways, this time seemed different and the explanation for that may lie with Prince Abdulaziz bin Salman, appointed less than a week ago as energy minister of Saudi Arabia, OPEC’s biggest member.
Mohammad Barkindo, the Secretary General of OPEC, said that it was the prince, whose experience of brokering oil negotiations behind the scenes spans three decades, who gently but firmly persuaded Iraqi and Nigerian officials to finally tow the line.
Prince Abdulaziz, rather than summoning Iraqi Oil Minister Thamir Ghadhban to his room for a rebuke, asked to visit his counterpart for guidance as he settles into the new role, the gentle approach disarmed Ghadhban and steered the Iraqi to publicly pledge an output cut of 175,000 barrels a day, said Barkindo.
Getting that promise likely built on efforts by Saudi Crown Prince Mohammed bin Salman, heir to the throne and Prince Abdulaziz’s half-brother, who called Iraq’s prime minister last week.
Making the OPEC+ deal a success is crucial for the Kingdom, which the International Monetary Fund estimates requires an oil price of $85 a barrel to balance its budget, compared with current market levels of about $60. Plans to sell part of state-run oil giant Saudi Aramco only add to the pressure it faces to bolster crude markets.
The real proof of whether Riyadh has succeeded will only arrive in coming weeks when estimates from consultants and media agencies will show if Iraq and Nigeria have met pledged cuts. Both Baghdad was reluctant to join in the OPEC+ accord from its very inception three years ago, arguing that after decades of wars and sanctions it should be exempt from making cutbacks, and instead allowed to let international companies press on with expansion projects.