OPEC leaves markets guessing about summit
March 4, 2016, 12:03 pm

OPEC members are not disclosing a confirmed venue for the upcoming summit with non-cartel producers [Xinhua]

And they’ve left oil markets teetering on the edge, hoping for some production cuts agreement in Q2 of this year.

Less than a month after prices dipped to $24 a barrel, there now appears to be increasing momentum to bring OPEC and non-OPEC producers into an oil pact of sorts – an idea first floated by Venezuela in January.

An oil pact may be the only way to lower oil production output and push energy prices up, some producing heavyweights feel.

On Thursday, Nigerian Oil Minister Emmanuel Ibe Kachikwu told reporters in the capital Abuja that global oil producers would likely meet in Russia later in March.

Nigeria, like most oil producers who rely heavily on energy exports as the main driver of their economies, has been lobbying other OPEC members to find a way to cut production and boost prices.

Analysts say that the powerful African nation is facing one of the worst ever economic crises, largely due to the 70 per cent fall in oil prices since 2014.

On Friday, US benchmark West Texas was at $34.65 at press time, while international benchmark Brent crude stood at 37.17, both up nearly 40 per cent from their lowest price range last month.

Nevertheless, Nigerian economists are projecting a $15 billion deficit this year.

Kachikwu’s announcement appears to reiterate a similar statement from Venezuelan Oil and Mining Minister Eulogio del Pino who previously said that Saudi Arabia, Russia and Qatar would meet in mid-March to discuss how to stabilize oil prices.

“We have reached an agreement…in a yet to be determined city, to decide various proposals,” Del Pino said in an interview with local broadcaster Telesur in late February.

He also called on all OPEC members and allies to participate in the meeting so as to take broad actions to tackle the troubled market.

“We need to submit this agreement to the main oil producers in the world … and take a decision on how to stabilize the market,” he added

The Saudi factor

OPEC de facto leader Saudi Arabia had previously balked at even holding a summit to discuss oil prices saying it preferred that markets regulate their own prices based on supply and demand.

But that was back when oil prices were around $45 a barrel, and before Riyadh’s coffers began to leak billions of dollars.

Saudi Arabia is said to have had an $87 billion deficit in 2015.

In December, Riyadh signaled it was willing to meet with other oil producers only on the condition they would commit to drastic output cuts.

Hint: Russia.

According to the International Energy Agency, Saudi Arabia produced at least 10.2 million barrels a day in January. By comparison, Venezuela pumped into global markets only 2.5 million barrels a day.

Russia, meanwhile, injected into the markets nearly 11 million barrels a day.

The Saudis had previously indicated they wanted Russia to first commit to curbing production before any summit could be held.

Not surprisingly, the Russians had declined that offer.

But each day that oil prices hover around $30 a barrel is a day that OPEC members and other non-members see millions drained from their coffers.

Russian economists, for example, say Moscow can weather the current glut as long as prices are above $30 a barrel. Anything lower than $30, they say, would have far-reaching damaging effects on the Russian economy.

Nevertheless, wealthier OPEC members have remained tight-lipped about the announced summit or the prospect of cuts.

When Venezuela’s del Pino met with his Saudi counterpart Ali Al Naimi last month, no mention was made of any agreement to curb production.

However, 10 days later, Saudi Arabia and Russia agreed in Doha to freeze output at January levels in a bid to prop prices.

The measure failed to create the kind of momentum hoped for in oil markets.

The BRICS Post with inputs from Agencies