Saudi Arabia promises not to flood oil market after OPEC fails to agree on output deal
Saudi Arabia promised on Thursday not to flood the oil market with extra barrels even as OPEC failed to agree on output policy, with Iran insisting on the right to raise production steeply.
Tensions between the Sunni-led kingdom and the Shi’ite Islamic Republic have been the highlights of several previous OPEC meetings, including in December 2015 when the group failed to agree on a formal output target for the first time in years.
Tensions, however, were less acute on Thursday as Saudi Arabia’s new energy minister, Khalid al-Falih, showed Riyadh wanted to be more conciliatory and his Iranian peer Bijan Zanganeh kept his criticism of Riyadh to an unusual minimum.
In a rare compromise, OPEC also decided unanimously to appoint Nigeria’s Mohammed Barkindo as its new secretary-general after years of friction over the issue.
Saudi Arabia and its Gulf allies had tried to propose OPEC set a new collective ceiling in an attempt to repair the group’s waning importance. But Thursday’s meeting ended with no new policy or ceiling amid resistance from Iran.
Despite the setback, Saudi Arabia moved to soothe market fears that failure to reach any deal would prompt OPEC’s largest producer, already pumping near record highs, to raise production further to punish rivals and gain additional market share.
“We will be very gentle in our approach and make sure we don’t shock the market in any way,” Falih told reporters.
“There is no reason to expect that Saudi Arabia is going to go on a flooding campaign,” Falih said when asked whether Saudi Arabia could accelerate production.
The market has grown increasingly used to OPEC clashes over the past two years as political foes Riyadh and Tehran fight proxy wars in Syria and Yemen.
Saudi Arabia effectively scuppered plans for a global production freeze – aimed at stabilizing oil markets – in April in the Qatari capital of Doha. It said then that it would join the deal, which would also have involved non-OPEC Russia, only if Iran agreed to freeze output.
