OPEC fails to agree on an oil output cap

Tensions between the Sunni-led kingdom and the Shi’ite Islamic Republic have dominated several previous Opec meetings.

Oil prices fell Thursday on news of the failed deal. Barkindo is to succeed long-time incumbent, Abdalla El-Badri, of Libya from August. Experts say OPEC countries could have agreed on a sliding ceiling that could shift between two benchmarks, both above 30 million barrels a day. At present, OPEC crude oil production is about 32.4 million bpd, out of a total global production of 96.2 million bpd.

This worries poorer OPEC members, not least Venezuela, racked by severe food shortages and inflation projected to hit 700 percent in 2016. In recent years, however, member countries have simply ignored production ceilings, rendering the group ineffective.

Iran maintained its right to steeply raise crude exports to pre-sanction levels, although Oil Minister Bijan Zanganeh said he didn’t think others in OPEC would ramp up supply.

Al-Falih, who was appointed oil minister last month to replace Ali al-Naimi, said that he doesn’t have a clear number for the price that will allow crude supply to come back rapidly. The one time head of the Nigerian National Petroleum Commission acted as secretary-general of OPEC a decade ago.

At the just concluded OPEC meeting however, OPEC welcomed the country, with no indication of settling membership fees.

The U.S. bank said that “fuelled by the lower prices, oil consumption around the world is booming on less efficient use (i.e. more SUV sales), less substitution effects (i.e. less electric vehicle sales or more propane use instead of biomass), and more economic demand (i.e. more miles driven or flown)”. Crude oil inventories are also down more than 1 million barrels per day from a 2015 peak.

Zangeneh said Iran’s production has risen above 3.8 million barrels a day and is quickly approaching 4 million.

China and India are the battleground for Saudi Arabia, Iran and Russian Federation and the OPEC meeting did nothing to suggest that the fight for market share is abating.

OPEC accepted a Saudi plan to scrap allocating fixed production quotas to member countries in 2011 and introduced an output ceiling which does not specify quotas.

Some traders said crude prices were partly pressured by the dollar’s recovery following comments by European Central Bank President Mario Draghi that were considered bearish for the euro.

Meanwhile, prices have recovered somewhat, surging briefly above last week amid falling output from non-OPEC members.