Exceptional times call for exceptional measures, and for Opec members these are exceptional times. Some, notably Venezuela and Nigeria, are being crushed economically with consequent social unrest. Others, namely the Mideast Gulf countries, are being forced to accept that a certain way of living may be coming to an end.
A ferocious round of shuttle diplomacy since the Algiers agreement has resulted in the square root of nothing, and yesterday’s unprecedented crude stockbuild in the US was the straw that broke the camel’s back. Crude is trading pretty much exactly where it was on 28 September, just before Opec suggested it could be on the verge of returning to market management.
Research analysts at Barclays think Opec’s attempts to be the solution have morphed into it being the problem. The group has talked a lot about cutting or capping production, but all the while members have been increasing output if they can.
Where once it let prices climb, and sometimes fall, and climb again, like a confident parent, it is now the sort of ultra-cautious dad who sees only danger in the swings and roundabouts.
“If Opec employed a hands-off approach, rather than jawboning expectations with a new meeting every couple of weeks, the market would be more stable. Over-involvement is bound to unlock forces that will hinder rebalancing,” Barclays said.
What are the chances of Opec members adopting a collective low-profile between now and the group’s meeting at the end of November? They look slim. Certain member ministers have the propensity to spout off at the slightest provocation, the secretary-general is not shy of a word or two, and Riyadh’s replacement as energy minister of the gnomic Ali Naimi with the more loquacious Khalid al-Falih has certainly upped the quote quota.
And the Opec November diary is pretty full. It releases its World Oil Outlook next week, a publication it describes with a straight face as part of its “commitment to market stability”. And to the surprise of many it has agreed the wording for its new Long-Term Strategy (LTS), a document it says provides “a clear and consistent framework” for the next 15-20 years.
The latter could be taken as proof that Opec is still able to agree among itself. But it’s a classic case of putting the cart before the horse, and that maybe Opec should agree what it’s doing between now and April before agreeing how to act between now and 2030.