With the global economy reeling from plunging oil prices occasioned by massive over-production, Nigeria, a key member of the Organisation of Petroleum Exporting Countries (OPEC) which depends hugely on oil revenue for its foreign exchange, has requested an emergency meeting to discuss steps to possibly cut down oil production and prop up oil prices.
But Nigeria’s call has been opposed by Iran, another prominent OPEC member, which claimed that the time is not yet right for such an intervention.
Minister of State for Petroleum Resources, Dr Ibe Kachikwu, made the call for an OPEC emergency at a panel session at the ongoing World Economic Forum at Davos, Switzerland, adding Nigeria’s voice to those of OPEC members, such as Venezuela, that are requesting an emergency meeting of the oil-producing nations to address the current oil crisis.
Speaking at the session, Kachikwu said with the oil industry in its current state, the members of OPEC, which produce about one-third of the world’s oil, needed to do something proactive soon.
He said, “There is a lot of energy around trying to meet earlier. Obviously, some of that is a panic reaction. Do we just sit back and watch? Or do we put more efforts in talking to countries, like Russia, to try to get some consensus of what we need to be doing?”
However, Iran disagreed with the premise of an emergency meeting as the country’s oil minister, Bijan Zanganeh, stated that the organisation currently has little intention of making a drastic change.
“There should be an intention to make a firm decision in such a meeting; otherwise, the meeting will have negative impact on world oil markets. The important thing is that there must be an intention for change, but we have not yet received such a signal,” the oil minister said, according to Reuters.
As the global economy heads for what is potentially a very volatile year, analysts have said that OPEC, which requires a consensus from all its members before it initiates a change, has to make a decision very soon.
Following the crash of oil price from an average of $114 a barrel in 2014 to less than $30 a barrel presently, Nigeria’s economy, as well as those of many other oil-dependent countries, has had an economic depreciation. Nigeria’s budget is benchmarked at $38 per barrel of oil as the country needs oil price to rally to fund its budget.
Some OPEC members such as Venezuela had called for emergency meeting but others such as Saudi Arabia, said to have an eye on the happenings in Iran as regards oil production, is yet to make a categorical statement on the matter.
There’s no tension between Iran and Saudi Arabia – Koozechi
Following the ongoing rift between two Middle East heavyweights, Iran and Saudi Arabia, over the execution of Iran’s top cleric, Sheikh Nimr Al Nimr, the Iranian ambassador to Nigeria, His Excellency Saeed Koozechi has said that there’s no tension as such between both countries.
Speaking in an exclusive interview, the envoy stated that even though Iran was very unhappy with Al Nimr’s execution by Saudi Arabia, both countries are not having a regional conflict.
He also stated that the Islamic Republic of Iran also regretted the burning of the Saudi Embassy in Tehran, saying some hoodlums took advantage of the situation by taking the laws into their hands.
“We condemn the unfortunate situation in very strong terms and we are happy that the police was able to put the situation under control and no Saudi diplomat was injured in the incident.
“In fact, over 60 arrests have been made while the matter is being investigated and the culprits will soon be charged to court’’, he added.
On how the country is taking the severing of links by Saudi and some other countries with Iran, he said it is regrettable that Saudi Arabia was too quick in reacting the way it did, adding that it was proactive and also encouraged other countries to do same.
Koozechi said he expected Saudi Arabia to have been more thoughtful and logical about the issue, instead of trying to overshadow their wrongdoing.
He said that although the executed cleric was a reformist and a critic of some of Saudi Arabian government’s policies, he never did anything to counter the security of the country to warrant the treatment meted out to him.
He recalled that Al Nimr was arrested four years ago and was until his execution in detention, stating that the Iranian government was not aware if he had the services of a lawyer to defend him in court before his execution.
Oil price falls 3% on swelling oversupply
Oil prices fell three per cent Monday as Iraq announced record-high oil production, feeding into a heavily over-supplied market.
Iraq’s oil ministry said oil output had reached a record high in December. Its fields in the central and southern regions produced as much as 4.13 million barrels a day, the government said.
The oversupply has wiped out much of the gains made in one of the biggest-ever daily rallies last week. Brent crude, the global benchmark, was down 83 cents at $31.35 a barrel at 1247 GMT, losing 2.6 per cent from its closing price on Friday, when Brent surged 10 per cent. U.S. crude traded 85 cents lower at $31.34 a barrel. A senior Iraqi oil official said the country might raise output even further this year.
“The news that Iraq has probably hit another record builds on the oversupply sentiment,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
“The oversupply will keep markets depressed and prices low, and on the other hand short positions are in excessive territory.”
The closing of large amounts of short positions had caused a huge rally on Friday that was largely undone again on Monday, creating huge volatility in the oil market.
In a sign that investors expect oil prices to rebound, data from Intercontinental Exchange showed speculators raised net positions of Brent crude in the week ending January 19. Fundamental factors remained bearish. Indonesia’s OPEC governor said support among the Organisation of the Petroleum Exporting Countries (OPEC) for taking steps to prop up crude prices is slim. The governor said only one OPEC country supported an emergency meeting over the matter.
Striking a more bullish tone, the group’s Secretary-General Abdullah al-Badri said at a separate event in London that he saw some signs the market was rebalancing. He also said OPEC and non-OPEC producers needed to work together to tackle oversupply in order to prop up oil prices.
The chairman of Saudi’s Aramco said on the sidelines of a different conference on Monday that oil prices would ultimately balance at a moderate level as demand continued to rise. In the U.S., one of OPEC’s largest production rivals, a further drop in the number of oil rigs was expected to weigh on output. U.S. investment bank Goldman Sachs said it expected production to decline by 95,000 barrels per day in 2016, including well deferrals, higher than previously assumed.
OPEC Sec-Gen urges non-OPEC to help clear oil stocks overhang
OPEC and non-OPEC oil producers need to jointly tackle global stocks overhang to enable oil prices recover with investments in new fields, OPEC Secretary-General, Abdullah al-Badri, said Monday.
“It is vital the market addresses the issue of the stock overhang. As you can see from previous cycles, once this overhang starts falling, then prices start to rise,” he told a conference in London.
“Given how this developed, it should be viewed as something OPEC and non-OPEC tackle together. Yes, OPEC provided some of the additional supply last year, but the majority of this has come from non-OPEC countries,” he noted.
He said it was crucial that major producers came up with a solution, as the market needed to see inventories come down to levels that would allow prices to recover and encourage investments. “The current environment is putting this future at risk. At current price levels, it is clear that not all of the necessary future investment is viable,” he said.
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