Impromptu talks between Saudi Arabia, fellow OPEC member Venezuela and oil powers Russia and Mexico yielded no agreement on Tuesday on how to address a growing oil glut, ending without any plan to cut output despite a collapse in prices. In a day of shuttle diplomacy before OPEC’s output meeting in Vienna on Thursday, energy officials from non-members Russia and Mexico rushed to the Austrian capital to push OPEC kingpin Saudi Arabia on the 30 percent price fall since June.
Saudi has kept the market guessing about its response to crude’s fall amid rapidly rising U.S. shale output, but Tuesday’s talks had led to speculation in some quarters that Riyadh might back a coordinated cut involving non-OPEC members. Venezuelan Foreign Minister Rafael Ramirez told reporters after the talks that while all sides agreed current prices were “not good” for producing countries, no coordinated output cuts were arranged on Tuesday.
“We discussed the situation in the market, we shared our points of view, we need to keep in contact and we agreed to meet again in three months,” Ramirez, who until recently was oil minister and president of state oil company PDVSA, said. Venezuela, a noted price hawk, would try for an output agreement within OPEC on Thursday instead, he said. Oil prices turned lower after the talks, with international benchmark Brent falling more than $1 a barrel.
Igor Sechin, the head of Russian state oil company Rosneft and a close ally of President Vladimir Putin, arrived in Vienna on Tuesday amid hints that Moscow could cut output or exports if the producer group did the same. Russian Energy Minister Alexander Novak also attended the four-country meeting. “I’d like to highlight that current oil prices are not critical for us. We can postpone some capital-intensive projects,” Sechin told the meeting, according to a Rosneft statement.
“What is going to happen of course is that it (low prices) will have an impact on the global oil supply,” he said, apparently referring to a possible longer-term drop in output in countries where oil production is more expensive, including some projects in the United States.
Mexican Energy Minister Pedro Joaquin Coldwell left the meeting before the other participants, without giving a statement.
EYES TURN TO THURSDAY
Oil market watchers are divided on the outcome of OPEC’s Thursday meeting. Predictions range from a large production cut to revive prices, to a small reduction, or none at all. Current prices are far below what most OPEC members and rival producers such as Russia need to balance their budgets, but the group has struggled to adapt to growing supplies from the U.S. shale boom. Some analysts say an OPEC cut of as much as 1.5 million barrels per day (bpd) is needed to support oil prices and avoid increasing a supply glut in the first half of 2015.
Algerian Energy Minister Youcef Yousfi told the official APS news agency on Tuesday that OPEC would seek a “consensual step” to try to bring stability to the oil market, without giving further details. Diplomatic and market sources say Saudi officials told briefings in recent months that the kingdom, with its large currency reserves, was prepared to withstand oil prices as low as $70-$80 per barrel for up to a year.
Saudi Oil Minister Ali al-Naimi said earlier this month that Riyadh’s desire for stable markets had not changed but gave no clue about his potential response.
In Vienna on Monday and Tuesday, Naimi brushed off reporters’ questions about oil prices and surplus supplies. “This is not the first time the market is oversupplied,” he said. Naimi did not speak to reporters after Tuesday’s meeting. Russia’s Kommersant newspaper cited sources on Monday as saying Russia might suggest cutting its oil production by around 300,000 bpd from next year and that Moscow expected OPEC to limit its output by another 1.4 million bpd.
Moscow’s relations with OPEC were soured by the country’s pledge to cut output in tandem with the group in the early 2000s. Russia failed to follow through, and raised exports instead. Iranian news agency Shana said Putin and Iranian President Hassan Rouhani spoke by telephone on Monday evening and agreed “on necessary cooperation in favour of oil markets”.
The agency did not say where it acquired the information. On Monday, the Kremlin said the presidents discussed Iranian nuclear talks and bilateral issues and made no mention of oil. On Monday, Iran and six world powers agreed to yet another extension in the talks aimed at resolving a 12-year-old dispute over Tehran’s nuclear programme until June 30, 2015.
That makes any quick revival in Iran’s oil exports very unlikely and removes a potential layer of complication to this week’s OPEC meeting.