Opec keeps oil supply policy unchanged

World oil glut set to expand as Iranians and Indonesians set to add to the output in a currently oversupplied market.

UAE Energy Minister Suhail bin Mohammed Al Mazrouei at the 168th Organisation of Petroleum Exporting Countries meeting in Vienna on December 4. Bloomberg News

VIENNA // Opec members failed to agree an oil production ceiling on Friday at a meeting that ended in acrimony, after Iran said it would not consider any production curbs until it restored output scaled back for years under western sanctions.

A final statement was issued with no mention of a new production ceiling, allowing member countries to continue pumping oil at current rates into a market that has been oversupplied.

Opec secretary general Abdullah Al Badri said the body could not agree on any figures because it could not predict how much oil Iran would add to the market next year.

Sanctions against the country were withdrawn under a deal reached six months ago with world powers over its nuclear programme.

Suhail bin Mohammed Al Mazrouei, Minister of Energy, said that Opec should cooperate with non-Opec countries and that the group was open to such discussions, but he also said the oil market would decide when to balance itself.

Speaking before the group’s policy meeting in Vienna, he said sustainability of crude supply was more of a concern than prices.

Iranian oil minister Bijan Zangeneh said before the meeting that Tehran would be prepared to discuss action only when his country reached full output levels, if and when western sanctions are lifted.

Saudi oil minister Ali Al Naimi earlier had said he hoped a growing global demand could absorb an expected jump in Iranian production next year: “Everyone is welcome to go into the market”.

Iran has repeatedly said it would boost production by at least 1 million barrels per day (bpd) when sanctions were lifted. Without curbs elsewhere this would add to a global glut as the world is currently consuming up to 2 million bpd less than it is producing.

Indonesia, which rejoined Opec after leaving seven years ago, said it would increase crude production.

The start of Indonesia’s Banyu Urip oilfield in Java will be the single biggest addition to global supply this year, helping the returning Opec member increase output by about 1 per cent this year and 5 per cent the next to approximately 830,000 barrels a day. The decline will resume from 2017, according to BMI Research.

“There will be a temporary boost,” said Peter Lee, a Singapore-based analyst at BMI. “It won’t be enough to make up for the decline in all other ageing fields.”

South-east Asia’s largest economy is returning to Opec as its government warns that the collapse in crude prices has worsened an “increasingly unappealing” energy investment climate and dependence on foreign oil grows.

With the International Energy Agency predicting the nation will import 40 per cent of its oil needs by 2018, the world’s biggest producers are getting a consumer in their midst.

“Our interest is to keep prices from rising too high and from falling too low,” said Widhyawan Prawiraatmadja, Indonesia’s new Opec governor. “If Indonesia is a part of Opec, we can be sure that Opec’s policy is in line with our interests.”

US oil prices fell $1 a barrel after Opec agreed to the output policy rollover.

* Reuters, Bloomberg News