Home' Trinidad and Tobago Guardian : December 4th 2014 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 2014 • WEEK ONE
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As Venezuelan Foreign
Ramirez urged fellow
OPEC members to
cut oil production at
one point during last
week s three-hour meeting in Vienna,
the split in the group quickly became
Eight countries---including those from
Angola and Nigeria, which are, like
Venezuela, among the hardest hit by
the five-month rout in crude prices---
embraced a reduction, according to five
people briefed on the meeting. Absent
from that list, though, was the most
important man in the room, Saudi Ara-
bian Oil Minister Ali Al-Naimi, who
led a group of four Persian Gulf nations
in voicing dissent, the people said.
And with that, the push for a cut,
which would require unanimous back-
ing, was shot down, leaving OPEC s
daily output target at 30 million barrels
and triggering a 10 per cent collapse
in prices by the next day.
The disagreement cements the for-
mation of two camps that had been
brewing for weeks within OPEC: the
financially strapped nations pleading
for a cut to trim the supply glut and
boost prices, and the fiscal powerhouses
willing to withstand lower prices in a
bid to get US shale drillers to curb their
"There are the ones in OPEC who
want a supply cut, and to see prices to
rise immediately, but can t do much
about it," said Eugen Weinberg, head
of commodities research at Com-
merzbank AG in Frankfurt. "And there
are those who can do something to
boost prices, but don t want to until
their goals are met, and so they wait."
Brent crude, benchmark for more
than half the world s oil, already had
fallen 32 per cent from a high for the
year in June by the time the ministers
gathered in the Austrian capital for the
November 27 meeting. The US stan-
dard, West Texas Intermediate, was
down the same amount.
From the beginning, it was clear that
this wasn t going to be just another
meeting of members of the Organisation
of Petroleum Exporting Countries.
Inside the gray, boxy, nine-story building near the
Danube Canal that houses OPEC s secretariat, the
ministers sat in alphabetical order at two long rec-
tangular tables in a hangar-like room to field questions
from the press. There were so many journalists pres-
ent---about 300 were registered---that they had to be
broken up into two groups. Naimi declined to respond
to all the questions directed at him.
Once the meeting began in earnest, he became
After Ramirez put forth the output cut proposal,
others suggested the amount should be 5 percent, or
1.5 million barrels a day, according to Iraqi oil minister
Adel Abdul Mahdi. Naimi expressed concern about
rising supplies from U.S. shale producers, according
to Iran s oil minister, Bijan Zanganeh. Demand for
OPEC s crude will fall every year until 2017 as US
supply expands, eroding its share of the global market
to the lowest in more than a quarter-century, according
to the group s own estimates.
The ministers of Kuwait, the United Arab Emirates
and Qatar, all members of the Gulf Cooperation
Council along with Saudi Arabia, showed support
for Naimi, according to the people, who asked not
to identified because the discussions were private.
The four Gulf nations didn t respond to requests for
comment from Bloomberg News today.
Venezuela s Information Ministry didn t respond
Saudi-Venezuela OPEC split
plays out behind closed doors
to an e-mailed request for comment.
The four nations opposing a cut require the lowest
oil prices among the group s members to balance
their budgets, according to figures compiled by
Bloomberg. Saudi Arabia, the world s largest oil
exporter, has US$745 billion of reserve assets, data
from the country s monetary authority show.
Iran ultimately backed the decision to maintain
output in the interests of OPEC unity, Zanganeh said.
When there isn t unanimity, the previous limits are
maintained, per OPEC s rules.
The accord was "not in line with what we wanted,"
Zanganeh said as he exited the secretariat last Thurs-
day. Allowing prices to tumble in a bid to get shale
producers to curb investment is a risky strategy, he
said the next day in an interview in Tehran.
"These prices that we see are not a sufficient
enough reason yet to say that definitely, within the
next four or five months ahead, shale oil output will
drop by 1 million or two million" barrels a day, Zan-
ganeh said. "There are no facts or figures to say that
shale production would definitely decrease."
Some of the OPEC members being hurt the most
by the rout in crude announced potential budget cuts
after the meeting. In Venezuela, where foreign reserves
sunk to an 11-year low last month, President Nicolas
Maduro said in a November 28 television address
that he was ordering "a series of cuts in the nation s
Iraq s government is considering spending cuts
even as the conflict with Islamic State threatens to
reduce economic output for the first time in at least
three years. The government formed a panel to look
into ways to reduce next year s proposed budget
deficit to a "realistic level," according to a November
29 cabinet statement. The current budget proposal
projects a deficit of about 47 trillion Iraqi dinars
Naimi, on the other hand, expressed pleasure with
the decision. Upon exiting the meeting, he described
the agreement as a "very happy" one, while U.A.E.
Energy Minister Suhail Al-Mazrouei said he supported
the group s retreat from its traditional role of adjusting
supply to counter declining prices.
"We don t support to be a swing producer whenever
prices fall," al-Mazrouei said on Twitter. The "market
will dictate the right stable price and we are not tar-
geting or setting a specific price."
The lines in OPEC are drawn.
The next meeting is scheduled for June 5 in Vienna.
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