After failing to reach an accord on oil supply in Doha last month, OPEC is poised to go another meeting with no agreement on how much crude to produce.
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All but one of 27 analysts surveyed by Bloomberg said the Organization of Petroleum Exporting Countries won’t set an output target on June 2, as it sticks with Saudi Arabia’s strategy of squeezing out rivals including U.S. shale drillers by pumping near-record volumes. An accord on an output cap with non-members such as Russia collapsed in Doha last month when Saudi officials insisted Iran would need to take part.
Oil has rebounded almost 80% to $48.35/bbl in London from the 12-year low reached in January as depressed prices take their toll on supplies. The International Energy Agency and Goldman Sachs Group Inc. say the crude glut is dissipating, signaling that the Saudi approach—opposed by most OPEC members when it was unveiled in late 2014—is finally paying off.
“The strategy is in the process of working—I don’t think they have much incentive to particularly do anything,” said Mike Wittner, head of oil-market research at Societe Generale SA. Even if they did, political tensions between Saudi Arabia and Iran thwart cooperation as seen at the Doha summit and at OPEC’s meeting last December, both of which were “pretty chaotic,” he said.
The head of Iran’s state oil company said at the weekend that the country has no plans to join any output freeze since it’s still ramping up exports to pre-sanctions levels.
Iranian shipments probably won’t surpass 2.2 MMbpd until midsummer, Rokneddin Javadi, managing director of National Iranian Oil Co., told Mehr news agency. Exports last reached that level before sanctions were imposed more than four years ago.
OPEC’s ministerial meeting in December ended without any agreement on an output ceiling as the group abandoned the target of 30 MMbopd that it had held—and mostly ignored—since late 2011.
The group’s current policy, which allows members to produce as much as they choose with no need for coordination, calls the organization’s basic purpose into question, said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt.
“The question is,” Weinberg said, “is OPEC dead or just in a coma?”
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