At OPEC, cooling rivalries, extending a hand
VIENNA, Austria — The just-ended OPEC meeting was about more than what a barrel of oil can fetch on the open market as the global economic picture dims.
OPEC heavyweight Saudi Arabia gave a nod, at least symbolically, to fellow member states that have grown increasingly uneasy about the rapid decline in crude prices. The Saudis attempted to placate rival Iran, and laid the groundwork for a potential new alliance with Russia, the world’s second-largest oil producer.
But OPEC’s announcement that it would cut output by more than 500,000 barrels by sticking closer to quotas did little to change what most consumers care most about — the cost of filling up a car with gas or heating a home over the winter.
Benchmark oil prices were on a downward course Wednesday, shedding 68 cents to fetch $102.58 a barrel on the New York Mercantile Exchange. Brent crude briefly touched $98.10.
Behind the scenes, the 13-nation energy cartel juggled the conflicting interests of Saudi Arabia and Iran — and brought oil and gas giant Russia closer into the fold by agreeing to sign a cooperation agreement with the Kremlin.
OPEC’s continued ability to present a common front, while extending a hand to Russia, is potentially bad news for major crude consumers including the United States and Europe. There may be even less wiggle room in trying to find the lowest bidder to meet their energy needs at a time when the summer’s record oil prices close to $150 are a still vivid memory.
But it also may have signaled that record oil prices have spoiled the global appetite for crude, at least for the near future easy payday loans.
"The ministers appear genuinely concerned that the bottom is falling out of global demand and that once-depleted stocks are rebounding with a vengeance," said Antoine Halff, an energy analyst with Newedge USA. "Their panic is testament to how soft the market has become. It is likely to grow even softer."
Saudi Arabia’s clout is key for Washington. President George W. Bush visited Riyadh twice this year to push an oil production increase. The Saudis answered by ramping up production by about 500,000 barrels a day.
OPEC’s decision Wednesday to cut output by 520,000 barrels effectively canceled even that relatively modest nod to U.S. requests, leaving some talking about a Saudi defeat and a victory for Iran, which has sought higher oil prices through production cuts.
Not so, said analyst and trader Stephen Schork, who was monitoring the meeting in Vienna.
"I wouldn’t say the Saudis backed down," he said. "I’d say it was a respectful nod to the other members of the group."
In reality, the Saudis are the tail that wags the dog at OPEC, accounting for nearly a third of the group’s production of around 30 million barrels a day. They often get their way at OPEC ministerial meetings, and a strong push by them in Vienna to keep the status quo on output probably would have succeeded.