OPEC oil ministers agreed Thursday to keep their production target
steady, in a compromise meant to defuse rivalries between Iran and Saudi
Arabia and to send a soothing message to economically troubled
consuming nations.
Oil prices have fallen more than 20 percent
over the past two months, and a statement from the Organization of the
Petroleum Exporting Countries citied "downside risks facing the global
economy" and ample stocks of crude as being responsible for the trend.
While
agreeing to hold the output target steady, however, the statement
suggested that OPEC ministers were ready to come together on short
notice if prices fell to levels dictating a production cutback. The
ministers, it said, "confirmed their readiness to swiftly respond to
developments that might place oil market stability in jeopardy."
OPEC
accounts for about a third of world crude production and its decision
Thursday corresponded with its professed goal of taking volatility out
of global oil markets. With the economies of Europe and the United
States feeble and even China seeing a slowdown, keeping production
targets steady at a time of falling prices was meant to reassure
consuming nations that they do not need to fear the added burden of more
pricey energy.
But analysts said OPEC sphere of influence was
limited.
"The truth is the decision today is not nearly as
important as three other events that will occur over the next few
weeks," said Jason Schenker of Prestige Economics. He listed Sunday's
election in Greece, which could decide whether the country stays in the
eurozone; a meeting of the U.S. Federal Reserve in Tuesday; and the July
1st implementation of an EU embargo on Iranian oil as much more
significant in determining where crude is headed.
That embargo,
combined with a U.S. push for a global ban on imports of Iranian crude,
figured prominently on the sidelines of the closed meeting.
Iran
came to Vienna seeking lowered output to raise prices, while the Saudis
were looking to increase production to make crude more affordable. On
paper the decision to keep output targets steady was meant to find a
compromise between the two positions. But OPEC members normally ignore
the official quota — the organization's daily output is now estimated at
nearly 32 million barrels.
OPEC Secretary-General Abdullah
Al-Badry told reporters that there was a "collective decision" to honor
the 30 million barrel ceiling. But the Saudis, and others with capacity,
were expected to keep overproducing to make up for any shortfall caused
by the sanctions on Iranian oil.
Iran, in contrast, is faced with
the prospect of having to cut its output of oil, which makes up nearly
80 percent of its foreign exchange earnings. Sanctions levied by the
U.S. over Tehran's refusal to curb its nuclear program have already cut
significantly into exports — from about 2.5 million barrels a day last
year to between 1.2 and 1.8 million barrels now, according to estimates
by U.S. officials. The European Union embargo will tighten the squeeze.
The
oil-related sanctions are only part of the regime of U.N. and other
international penalties levied against Iran for its refusal to curb
uranium enrichment. Tehran says it is enriching only to create reactor
fuel and insists it is not interested in atomic arms, but concern
remains strong because enrichment to high levels also can produce the
core of nuclear weapons.
Iran has cautioned the Saudis not to use
the oil weapon against it, and Iranian oil minister Rostam Ghazemi on
Wednesday warned the U.S. and Europe that their tactics will backfire.
"The
use of instruments such as sanctions or direct military interventions
in energy-producing countries will increase the price of oil and market
volatility," he told an OPEC seminar.
On Thursday, he denied that
Iran was hurting.
"Our exports remain as before," he declared,
adding that the oil embargo will "not have any negative impact on Iran."
While
the Iran-Saudi controversy will continue to bubble, analyst Cornelia
Meyer said Thursday's decision is one that "allows everybody to save
face," while leaving OPEC positioned to change its ceiling as needed.
"We
don't know which way the economy is going. It could really tank, given
the euro, "she said. "But, on the other hand, if something happens with
Iran the oil price could spike, so it gives them the flexibility to deal
with what happens over the next few months."
In another
manifestation of their rivalries, both Iran and the Saudis are fielding
candidates for the post of OPEC secretary general, to be filled in
December when Al-Badry of Libya retires. But Ecuador also is in the
race, along with Iraq, and expectations are high that the ministers will
opt for Wilson Pastor of Ecuador.
Al-Badry said ministers
deferred a decision on his successor to the next planned OPEC meeting in
December.
Saudi-Iranian tensions are an embarrassment to OPEC,
and Saudi Oil Minister Ali Naimi refused to answer questions on the
issue as he prepared to join the meeting Thursday. But he earlier denied
tightening the screws on Iran by selectively providing crude to
consumers honoring the Iran embargo, telling reporters his country sells
to whoever buys.
"We don't sit and say: 'We want to sell to this
country or that country (or) whatever,'" he said.
("The Assciated Press")