U.S. President Donald Trump’s demand that OPEC take rapid action to reduce oil prices went unanswered as the group stuck with plans for a gradual output boost, saying customers have all the crude they need for now.
In a stark contrast to the dramatic policy U-turn that Trump’s tweets provoked earlier this year, Saudi Arabia, Russia and their allies gave broad reassurances that more oil is coming without offering any kind of urgent supply surge.
“The reason Saudi Arabia didn’t increase more is because all of our customers are receiving all of the barrels they want and they’re not asking for any more,” Saudi Energy Minister Khalid Al-Falih said after meeting with fellow ministers in Algiers on Sunday. “The market is reasonably steady and I think we should just be dynamic and responsive and responsible in our actions.”
The Organization of Petroleum Exporting Countries and its allies are just halfway toward their June pledge to pump an extra 1 million barrels a day of crude to fill the gap created by an economic collapse in Venezuela and renewed U.S. sanctions on Iran. They may not get all the way there for two to three months, Al-Falih said. The meeting ended without any member committing to a specific output increase, delegates said.
The lack of a clear response to Trump adds to speculation about the group’s ability, or willingness, to bring oil down from near $80 a barrel. It suggests the president’s goal of crippling Iran’s economy through sanctions without significantly raising oil prices could prove elusive.
“OPEC and non-OPEC haven’t been able to deliver” so far, said Amrita Sen, chief oil analyst and co-founder of consultant Energy Aspects Ltd. “That will only get harder as Iranian exports and production start falling fast.”
The group’s compliance rate — the proportion of their 1.8 million barrel-a-day output cuts achieved each month — was 129 percent in August, leaving them about 500,000 barrels a day short of their June pledge.
They agreed in Algiers to stay the course with that agreement to hit 100 percent, Oman’s Oil Minister Mohammed Al Rumhy told reporters after the meeting. Yet it’s unclear whether they are able to do that, he said. They could be close to that level in September or October, said Russian Energy Minister Alexander Novak.
There was some good news on the supply front. Libya’s oil production has climbed as high as 1.278 million barrels a day, the most since 2013, said Mustafa Sanalla, chairman of the state-run National Oil Corp. If sustained for the whole month, that would be an increase of about 600,000 barrels a day since June, keeping pace with the drop in Iran’s exports over the same period.
Output could go even higher if the security situation improves, Sanalla said, but numerous threats remain. A deadly Islamic State attack on NOC’s headquarters in Tripoli this month “ exposes the fragility of security arrangements in Libya,” he said.
Officials were meeting in Algiers to review output data and discuss the market. That’s no easy task in a world where supply disruptions are worsening just as the emerging market crisis and U.S.-China trade war cast doubt on the strength of demand.
“We, Saudi Arabia, have not seen demand for an additional barrel we didn’t produce; we have topped our storage to the maximum because the demand hasn’t materialized,” Al-Falih said. The kingdom is worried about the global economy, but still the group should be willing to “take proactive actions to avoid conditions that could make consumers uneasy and anxious.”
Both in public and behind closed doors, Saudi Arabia gave no specific commitment to tap its 1.5 million barrels a day of spare capacity to bring down prices. At a meeting on Saturday with fellow Gulf Arab ministers, Al-Falih indicated he saw no need to make big changes to output policy right now and said they should wait and see what happens before the next OPEC ministerial meeting in December, according to three delegates.
Several ministers voiced similar sentiments. Russia’s Novak told reporters that his country has the capacity to increase production, but the amount of any additional supply will depend on the market.
“We still have a job to complete which is going to the 100 percent,” said United Arab Emirates Energy Minister Suhail Al Mazrouei. His country has spare production capacity but won’t overuse it, and right now the market is in “good condition.”
Donald J. Trump @realDonaldTrump We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!Sent via Twitter for iPhone.
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Oil prices have climbed about 18 percent this year and last week Brent crude rose above $80 a barrel, provoking the U.S. president to direct his first social-media barb against the cartel since July 4. Trump was returning to a playbook that’s won him significant victories already this year — namely the decision by OPEC and its allies to start rolling back production cuts and pump an extra 1 million barrels a day.
Russia has seized on that promise, with recent data showing its production jumped to a new post-Soviet record. Yet Saudi Arabia’s own output actually dropped in July amid signs it couldn’t find enough buyers. Suggestions of record production of near 11 million barrels a day didn’t materialize and the kingdom’s output has hovered near 10.4 million since June.
“Saudi Arabia is uncomfortably squeezed,” said Bob McNally, founder of consultants Rapidan Energy Group in Washington, adding that the kingdom had “limited spare capacity” to compensate for the loss of Iranian supplies.