The Opec meeting in Vienna is still a month away, but some member states must be wondering whether it will be worth the trip.
Sure, the “city of dreams” will be all sparkly, with Christmas markets selling candles, mulled wine and baubles. And Vienna’s InterContinental hotel does a mean wiener schnitzel. But unless something dramatic happens between now and 4 December, heading there will be a fruitless exercise for Opec’s internal dissenters.
To every plea for a change of heart — whether from cash-strapped Caracas or ailing Algiers — there comes the same, solid, stony response. Opec’s policy is working, says secretary-general Abdullah al-Badri. Opec’s policy is working, says Saudi Arabia’s deputy oil minister Abdul Aziz bin Salman.
The power brokers in Riyadh, Kuwait City and Dubai will point to the IEA’s World Energy Outlook for affirmation. In the agency’s central scenario, non-Opec output plateaus before 2020, then falls back steadily. At the same time, Opec’s market share begins to rise, reaching 41pc in 2020, 46pc in 2030 and 49pc in 2040. That’s the equivalent of adding slightly more than current Saudi output to the market, the IEA says.
In the IEA’s new, low oil price scenario, Opec’s market share rises above 50pc by 2030, the most since the organisation’s 1970s heyday.
(Of course, the IEA is dealing in scenarios, which cannot be read as anything except possible outcomes predicated on a confluence of specific circumstances. Its low oil price scenario, for instance, assumes a more stable Middle East. Ponder the likelihood of that for a moment.)
Anyway, “but at what cost” comes the cry from non-Gulf Opec and others, including an indignant Oman. Lower prices mean lower revenues, just as the IEA says meeting its projected output levels will require a “formidable commitment of capital”. By 2030, some oil producing countries could have their backs to the wall. Even Saudi Arabia may have to head for the international money markets as it looks to balance the books.
So, in early December, flights will leave Caracas and Algiers carrying world-weary oil officials to Austria on a fool’s errand. Saudi oil minister Ali Naimi will be asked about absolute production levels during his morning “jog”, of course. And in response he’ll give a withering look and say something while at the same time managing to say nothing. One possible change could be at a creative accounting level, as Indonesia is welcomed back into the fold — including the crude production of a net-oil consumer may allow Opec wriggle room to appease the returning Iranians.
And that means the outcome of the Opec meeting could be the facilitation of more oil onto the market.