With tensions building within OPEC, the future of oil prices has entered a new phase of uncertainty. Earlier this year, there appeared to be a meeting of the minds, just in time to stop oil prices from the free fall that sent crude all the way down to $24-$26 per barrel range.
At the time, Saudi Arabia had agreed to support a global oil supply limiting pact, which would serve to restrict output and help stabilize oil prices. After a few months to prepare for the signing of the pact, the group recently convened in Algiers to negotiate output levels and get the deal done. Unfortunately, both Iran and Saudi Arabia came to the table in the same combative way that has long created issues within the OPEC organization.
As reported by Rueters just days ago, the two oil titans were clashing again and a deal no longer seemed imminent. The news immediately shook oil prices as they fell from the mid $50 range into the mid $40 range. Ironically, the news source was blamed for the price fall instead of the blame going to OPEC’s inability to negotiate a deal.
Observers noted at the meeting that the Iranian Oil Ministers came in with a directive that seemed to include an unwillingness to negotiate. According to sources, the result was “The Saudis have threatened to raise their production to 11 million barrels per day and even 12 million bpd, bringing oil prices down, and to withdraw from the meeting.”
The Iranians countered by stating they should be exempted from any output limitations as they continue trying to make economic progress following the recent lifting of EU sanctions.
None of this should come as a surprise to oil consumers around the world. For years now, the Saudis and Iranians have had pricing motivations that just never seem to line up with one another’s directives.