Indonesia’s return to OPEC and its implications for oil prices

Oil prices fell sharply lower this afternoon, after a report suggested that the Organisation of Petroleum Exporting Countries (Opec) decided not to cut production at its meeting in Vienna. Change in output requires returning to the former set and then the new set will be defined, Asali affirmed. With global supplies of oil far outpacing demand, a debate is expected Friday between a faction that wants a reduction in production to boost prices and another arguing such a move would only give away market share to competitors in the US and elsewhere.

Three OPEC delegates and sources said the group would maintain output without changing the current ceiling of 30 million barrels per day (bpd), sticking with its plan to defend market share rather than shore up prices at near seven-year lows.

Few surprises are expected when it comes to its production policy when OPEC meets on Friday in Austria as it is showing no signs of slowing down production, even in the face of the significant financial strain that this is putting on Saudi Arabia.

About electing the new secretary general of OPEC, Asali said that Iran, Iraq, Nigeria and Saudi Arabia have candidates and surely Iran would not vote for Saudi candidate and the same way Saudis would vote no to Iran’s. Though Russia has never joined the cartel, it has signaled more willingness to cooperate with the group this year.

But Naimi said on Friday the report was “baseless”.

Iraq and Iran are longtime OPEC members.

But as Thursday’s settlement approached, oil prices regained steam, rising more than 5 per cent at one point.

Heading into the Vienna meeting Friday, the cartel’s dozen member countries from Africa, the Middle East and Latin America, had yet to strike an agreement on tackling an oil supply glut, with Iran insisting that it plans to hike its own production early next year.

But Iran’s hopes of a cutback from others for now are unlikely to be fulfilled.

OPEC’s poorer countries have been piling pressure on its wealthier members, led by Saudi Arabia, to curb supply.

“We are here to listen”, he said before the OPEC meeting.

Reduced oil revenue is also causing some of the influential business class to push Riyadh to quickly find an end to its expensive war in Yemen, the kingdom’s biggest strategic gambit in decades, and one that defines King Salman’s foreign policy.

Faced with dismay among members unable to balance their books, Saudi Arabia has adopted a conciliatory tone, promising to listen to all before a policy decision is made.

For Saudi Arabia, low oil prices and the prospects of big fiscal deficits have already prompted officials to float the idea of potentially unpopular reforms, including introducing a value added tax and cutting energy subsidies.

The official ceiling is, however, largely symbolic as countries produce above it. OPEC pumped 32.1 million barrels a day in November, exceeding its target for an 18th month, according to a Bloomberg survey of companies and analysts.