An association of 12 oil-exporting countries, OPEC, Wednesday failed to build consensus to increase crude production ceiling even as Saudi Arabia and Iran remained at odds at the Vienna meeting causing oil prices to rise.
The Organization of Petroleum Exporting Countries (OPEC) met for the first time since a wave of revolutions hit in the Middle East and Saudi oil minister Ali Naimi described the conference “one of the worst meetings we ever had,” Wall Street Journal said.
OPEC, which also includes Algeria, Angola, Ecuador, Iraq, Kuwait, Libya, Nigeria, Qatar, the United Arab Emirates, and Venezuela and produces more than a third of the world’s petroleum, takes all its decision with consensus, and not majority.
“We are unable to reach consensus to... raise our production,” OPEC Secretary General Abdullah Al-Badri told the media – a first admission of this kind in decades. Al-Badri’s statement broke the expectation for a raise in the oil production ceiling.
“Saudi Arabia and other key members of OPEC, with the usual exceptions of price hawks Iran and Venezuela, appear to be leaning toward a quota increase because they are concerned about the negative impact of high prices on GDP growth and, ultimately, on oil-demand growth,” Michael Wittner, a New York-based oil-market analyst, had said in a statement Tuesday. OPEC was about 65 percent likely to raise its production target, he had said.
Nations backed by Saudi Arabia, leader in oil production, wanted to increase oil production by 1.5 million barrels a day to ease markets and dispel concerns that crude was a lot costlier for consumer nations in financial crunch. But Iran, group’s second-largest oil producer, and nations close to it opposed the proposal.
An increase in the oil production ceiling was needed because Libya’s ongoing revolution against that country’s leader Muammar Gaddafi had cut supplies from the North African country by almost 90 percent, Bloomberg estimated.
Oil traded in London rose more than $1 to above $118 a barrel after the OPEC meeting and U.S. oil rose more than $2 to above $101, Reuters reported Wednesday.
Bloomberg quoted a report from Johannes Benigni, chairman of consultant JBC Energy GmbH in Vienna, as saying that OPEC would need to raise its production target by as much as 2.5 million barrels a day otherwise prices could move higher.
Democrat Representative Edward Markey, said in a statement, “OPEC, led by Iran and Venezuela, has snubbed its nose at the United States and the rest of the Western nations addicted to OPEC oil…This is a clear sign that America must engage in a long-term plan to break our ties to this OPEC-controlled market, and prepare to deploy America’s oil reserves now to head off an economic collapse from continued high gas prices.”
However, Saudi Arabia is expected to raise its production unilaterally if crude prices go way beyond $100.