Opec: extraordinary times without extraordinary meetings

Here’s a statement from Opec — “Crude volumes entering the market remain well in excess of demand: this is clearly demonstrated by crude stocks in OECD countries that are well above their five-year average and are expected to continue to rise… if unchecked, prices could fall to levels that would place at jeopardy the investments required to guarantee adequate energy supplies in the medium to long term… In light of the above, the Conference agreed to cut production by 4.2mn b/d.”

Alas for any remaining oil bulls out there, this isn’t taken from today’s Opec Monthly Oil Market Report, but from what now seems like the dim and distant past.

It was from the meeting of December 2008, in Oran, Algeria — in the middle of a remarkable succession of Opec gatherings that came in response to the banking crisis. Extraordinary times called for extraordinary meetings — as well as convening at its customary muster station of Vienna in February and October 2008, Opec also convened in Abu Dhabi in December 2007; in Oran in December 2008; in Luanda, Angola, in December 2009; and in Quito, Ecuador, in December 2010. In between these emergency meetings, the organisation found the time for a couple of ordinary, scheduled meetings.

In 2015, as the oil price boards glow red, the cries again go up for a new round of emergency meetings, mostly from the organisation’s panicking periphery. With Opec’s own reference crude basket of a dozen grades below the price it stood at when the compilation was introduced 10 years ago, it’s no surprise some are getting twitchy. Venezuela, Algeria and the west African nations in particular are feeling the squeeze. Even on the other side of Opec’s divide, the Mideast Gulf states’ deep pockets may have to be augmented by monies raised in the bond markets.

The impact of a prolonged period of lower oil prices cannot be understated. Russian second-quarter GDP fell by nearly 5pc. Norway may yet concede that this is, indeed, the rainy day it’s been saving for all these years.

But those members calling for an Opec emergency shindig might as well be shouting into the void. The last time Opec revealed individual countries’ contributions to a change in its policy, it was clear that Saudi Arabia was shouldering most of the burden. The new Saudi policy — nominally in favour of output cuts, but only if others commit to them as well — means this could not happen again. Meanwhile, Iraq is pumping hard to make up for lost time and Iran will surely follow suit as soon as it can.

Opec is unrecognisable now from the organisation that met eight times in three years, when it looked like demand might fall off a sub-prime cliff. No danger of that today, according to Opec, but although the oil price is not right for many producing countries, the Algerians or the Venezuelans can call for an emergency meeting all they like. The Saudis cajoled everyone into backing their market-share plan and only when the Riyadh power-brokers deem it time for a change is that direction likely to shift again.

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