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BloombergLondon<\/p>\n<\/div>\n
When Saudi Arabia and Russia announced a new policy to revive oil production last week, one thing was missing: most of the other partners in their grand coalition.
\nWith oil supplies tightening and prices soaring, the two countries agreed to restore some of the output they halted as part of an accord with 22 other producers, drawn from the Organization of Petroleum Exporting Countries and beyond. The trouble is, officials from several countries in the agreement, both inside Opec and outside, said they disapproved of the proposal to raise output and saw difficulties in reaching a consensus when they meet in Vienna next month.
\n\u201cIt might be a contentious meeting,\u201d said Ed Morse, head of commodities research at Citigroup Inc in New York.<\/p>\n
The matter is particularly sensitive because Russia and Saudi Arabia are proposing raising production to make up for losses from other members, notably a worsening slump in Venezuelan supply and a potential drop in Iran as renewed US sanctions kick in. Those countries have nothing to gain from looser output caps, and plenty to lose if oil prices extend Friday\u2019s steep decline.<\/p>\n
Most nations in the agreement weren\u2019t consulted about the Saudi-Russia policy to revive output. Suhail al-Mazrouei, UAE Energy Minister and current holder of Opec\u2019s rotating presidency, said the group as a whole will decide whether to adjust output.
\n\u201cNo decisions made by two countries or three countries are going to be taken,\u201d he said in an interview in St Petersburg, Russia, on Friday after meeting with his Saudi and Russian counterparts. \u201cWe respect all the member countries.\u201d
\nSaudi Arabia and Russia could simply go ahead with their plan without the blessing of other players. Because they\u2019re the only countries capable of increasing production significantly, the impact on the market would be almost as great if they chose to go it alone.
\n\u201cIf the rest are not on board, Saudi will do it alone, so it\u2019s not much of a choice,\u201d said Roger Diwan, an analyst at consultant IHS Markit Ltd in Washington.<\/p>\n
Yet the success of the 24-nation alliance that agreed to the supply cuts seems to be valuable to the kingdom, and so they may prefer a more diplomatic route by seeking consensus. If so, it would be a tough sell.
\nThough they\u2019re not always enforced, Opec\u2019s rules do require policy changes be approved by all members \u2013 many of which would lose out in this case. Outside the Arab members in the Arabian Gulf, most countries aren\u2019t able to boost supplies and would face lower revenue if prices slide further.<\/p>\n
US oil futures fell 4.5% to $67.50 a barrel in New York on Friday. That\u2019s the biggest drop in almost a year, erasing most of the gains for May.
\nIn Venezuela, which lobbied hard to set up the 2016 accord, output has plunged to the lowest level since the 1950s as a spiralling economic crisis batters its oil industry. Losing further earnings could accelerate its financial collapse.
\nIran, a long-standing political antagonist of Saudi Arabia, faces the prospect of losing customers to its rival as renewed US sanctions \u2013 imposed after President Donald Trump quit an agreement on the country\u2019s nuclear programme \u2013 force buyers to reduce purchases.
\nIt could be that the production increases aren\u2019t substantial enough to need much consultation within the group, according to Helima Croft, chief commodities analyst at RBC Capital Markets LLC. The lower end of the range the producers are discussing \u2013 a return to levels agreed at the outset of the deal \u2013 is just a few hundred thousand barrels a day above current output.
\n\u201cI strongly believe that we will find a compromise, because all countries are interested in a stable market,\u201d Russian Energy Minister Alexander Novak said in a Bloomberg television interview in St Petersburg on Friday.<\/p>\n","protected":false},"excerpt":{"rendered":"
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