OPEC concluded its 169th meeting today in Vienna, without making any changes to its oil production policy. Other than some last minute speculation sparked by Saudi oil minister Khalid al-Falih’s remarks that he was open to discussing production levels, this outcome had been expected for weeks.
Rather than the acrimonious sentiment of the previous year’s meetings however, the mood was more productive. Weak producer nations like Venezuela, Algeria, and Libya have clearly resigned themselves to going along with the policies of the stronger OPEC nations like Saudi Arabia and the UAE. The organization presented the consensus that OPEC’s policy of unlimited production is working to rebalance the market and that the best policy for current market conditions is no change.
OPEC expects non-OPEC oil supply to continue to decline by 740,000 barrels per day in 2016. Production has already declined by 1 million barrels per day of crude oil from its peak in January, 2015.
Demand grew by about 1.5 million barrels per day in 2015, and OPEC anticipates that growth to continue in 2016, particularly in India. Based on rising crude oil prices and moderation in crude oil stock levels, the organization believes that supply and demand are in the process of converging. However, oil stocks are at a 5-year high and need to “draw down to normal levels.”
Of major concern to OPEC is the decrease in investment in oil exploration and production. This is very troubling for the long-term future and OPEC emphasized the importance of maintaining consistent upstream investment levels in order to prevent future supply shocks.
Some OPEC members, such as Saudi Arabia, Kuwait, and the UAE, have maintained consistent investment, but OPEC sees troubling signs in the lack of investment by non-OPEC sources. Greater investment is needed to ensure long-term price stability and OPEC hopes the current price stabilization will promote this.
As expected, Gabon was readmitted to OPEC and Dr. Mohammed Barkindo from Nigeria was elected Secretary General of the organization. He will take over from Abdallah Salem el-Badri of Libya. This could be taken a sign of greater unity, considering that the organization was previously been unable to agree on a candidate to take over from el-Badri. However, Venezuela left the meeting clearly unhappy, and its oil minister remarked sarcastically that at least the organization “chose a new Secretary General.”
To close the meeting, Chairman and President Dr. Mohammed bin Saleh al-Sada of Qatar reminded the audience that OPEC does not stand still, but is a living breathing entity. In his closing remarks as Secretary General, El-Badri addressed the question of whether OPEC is dead, saying:
“I’ve heard this five or six times in my career…don’t take the notion that OPEC is dead. OPEC is alive, OPEC will be a very important factor in the world.”
All eyes will be turned toward November 30, 2016, the date set for the 170th OPEC meeting. Although OPEC is always open to interim meetings, particularly with non-OPEC producers, the organization is satisfied with its current policy and with the direction of the oil market. It is unlikely that OPEC will act before November 30.