Saudi oil stance deepens OPEC split – Frustrated delegate declares OPEC ‘dead’

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LONDON/DUBAI, May 6, (RTRS): As OPEC officials gathered this week to formulate a long-term strategy, few in the room expected the discussions would end without a clash. But even the most jaded delegates got more than they had bargained with.

“OPEC is dead,” declared one frustrated official, according to two sources who were present or briefed about the Vienna meeting.

This was far from the first time that OPEC’s demise has been proclaimed in its 56-year history, and the oil exporters’ group itself may yet enjoy a long life in the era of cheap crude.

Saudi Arabia, OPEC’s most powerful member, still maintains that collective action by all producers is the best solution for an oil market that has dived since mid-2014.

But events at Monday’s meeting of OPEC governors suggest that if Saudi Arabia gets its way, then one of the group’s central strategies — of managing global oil prices by regulating supply — will indeed go to the grave.

In a major shift in thinking, Riyadh now believes that targetting prices has become pointless as the weak global market reflects structural changes rather than any temporary trend, according to sources familiar with its views.

OPEC is already split over how to respond to cheap oil. Last month tensions between Saudi Arabia and its arch-rival Iran ruined the first deal in 15 years to freeze crude output and help to lift global prices.

These resurfaced at the long-term strategy meeting of the OPEC governors, officials who report to their countries’ oil ministers.

According to the sources, it was a delegate from a non-Gulf Arab country who pronounced OPEC dead in remarks directed at the Saudi representative as they argued over whether the group should keep targeting prices.

Iran, represented by its governor Hossein Kazempour Ardebili, has been arguing that this is precisely what OPEC was created for and hence “effective production management” should be one of its top long-term goals.

But Saudi governor Mohammed al-Madi said he believed the world has changed so much in the past few years that it has become a futile exercise to try to do so, sources say.

“OPEC should recognise the fact that the market has gone through a structural change, as is evident by the market becoming more competitive rather than monopolistic,” al-Madi told his counterparts inside the meeting, according to sources familiar with the discussions.

“The market has evolved since the 2010-2014 period of high prices and the challenge for OPEC now, as well as for non-OPEC (producers), is to come to grips with recent market developments,” al-Madi said, according to the sources.

For decades Saudi Arabia had a preferred oil price target and if it didn’t like the prevailing market level, it would try to orchestrate a production cut or increase in OPEC. It would contribute the lion’s share of the adjustment and forgive smaller and poorer members if they failed to comply with the group’s agreement.

Back in 2008, the late King Abdullah named $75 a barrel as the kingdom’s “fair” oil price, most likely after consultations with the long-serving oil minister Ali al-Naimi.

Also:

DUBAI: The Saudi Stock Exchange has selected HSBC Saudi Arabia to advise on its own planned flotation scheduled for 2018, the exchange, known as Tadawul, said in a statement on Thursday.

“The appointment of a financial adviser is an important milestone in the beginning of the IPO (initial public offering) journey which is planned to take place by 2018 after obtaining the necessary approvals,” the short statement said.

Tadawul Chief Executive Khalid al-Hussan told Reuters on Tuesday the exchange would make a decision “in the coming days” on who it would select as its advisor.

Three banking sources said the decision was made at a meeting of Tadawul’s board on Thursday. The sources declined to be named as they were not authorised to speak to the media.

Tadawul is by far the largest stock market in the Middle East, with a market capitalisation of 1.51 trillion riyals ($402.8 billion), according to Thomson Reuters data.

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