Wednesday, 12 December 2012
Iraq-Saudi rivalry surface at OPEC
Saudi Arabia. Having overtaken Iran as OPEC's second biggest producer, a rejuvenated Iraq is beginning to worry Riyadh.
At the on-going meeting of the Organization of the Petroleum Exporting Countries, the opening salvos were fired in the struggle over who takes responsibility for cutting output if oil prices, now at a comfortable $108 a barrel, start falling. After 20 years of war, sanctions and civil strife that left its oil industry in disarray, Iraq is in no mood to consider curtailing output just as it starts to take off.
"Iraq will never cut production," said Iraq's OPEC Governor Falah Alamri. "Some countries that have increased their production in the last two years - they should do so. This is a sovereign issue, not an OPEC issue."
That was a clear reference to Saudi Arabia, which this summer lifted output to a 30-year high above 10 million barrels a day to prevent oil prices ballooning after Western sanctions on Iran halved its production. The view from Riyadh, said delegates at the meeting, is that Iraq should contribute to the next round of OPEC supply curbs.
OPEC agreed to retain its 30-million barrel-a-day output target and meet next on May 31, but many market observers think supply restrictions may be needed sooner rather than later if producers want to prevent slow global growth sending prices tumbling.
Output from OPEC is already down sharply from the highs of the summer when the Saudi surge took the 12-member group to nearly 32 million bpd. Production in November was down to 30.8 million with Saudi easing to 9.5 million. But OPEC may need to ease further to balance the market in the first half of next year when, demand depressed by a stagnant economy, its own forecasts indicate the requirement for OPEC crude will come in at only 29.25 million bpd.