Kippreport investigates if oil prices aren’t the only cause for the market slumpAugust 27, 2015 12:00
OPEC talks to EU against tense backdrop
Iran says IEA strayed from free-market principles; OPEC/IEA ties frayed; OPEC also divided; EU says 'some concern' about oil price.
June 28, 2011 9:31 by Reuters
Iran’s OPEC president stuck to its uncompromising stance as it headed into talks with the EU on Monday, saying there was no need to add extra oil to the market and the IEA emergency stocks release was meddling.
The International Energy Agency last week ordered the release of emergency stocks for only the third time in its 37-year history after OPEC failed to agree an output increase to offset lost Libyan oil.
“The market is under normal conditions. Supply and demand are desirable. There is no additional need for supply in the market,” said Iran’s oil ministry caretaker Mohammad Aliabadi, who holds the rotating OPEC presidency until the end of this year.
He was speaking in Vienna, where he was meeting European Union officials for their annual exchange on energy issues.
The dialogue has taken place every year since June 2005 and typically has been an uneventful debate of topics including the impact of speculation and the need for regulation.
Monday’s talks, at least behind the scenes, could be far livelier following the opening of a rift within OPEC and tension between the producers and the IEA, representative of OECD consumer nations, following the reserves release.
Aliabadi argued consumer countries, led by top oil consumer and Iran’s arch enemy the United States, had strayed from their free-market beliefs.
“Why they are not abiding by those principles is really a big question for us. We believe that prices should be set by the market itself,” Aliabadi said.
On his arrival for Monday’s talks, EU Energy Commissioner Guenther Oettinger said there was still “some concern” about the oil price.
Iran was among seven members of the 12-nation producer group that blocked a Saudi-led proposal earlier this month to increase OPEC’s output targets.
Immediately after the OPEC meeting collapsed without a new supply deal, leading exporter Saudi Arabia said it would pump all the oil the market needed, but the IEA still ordered a 60 million barrel release from emergency stocks.
The IEA said the release was consistent with its two previous uses of emergency reserves in that it made up for a supply shortfall caused by the loss of Libyan oil to civil war.
But Iran is not alone in its view there was much more to it than that.
Analysts have noted an economic element, as the world frets about the impact of oil prices above $100 a barrel on a fragile world economy, and a political element as U.S. President Barack Obama positions for re-election.
Brent crude fell to a session low of just above $102 a barrel on Monday, roughly 10 percent lower than the market close on Wednesday, the day before the IEA announcement.
The IEA has had far more impact on the market than OPEC’s inability to reach a new supply agreement and analysts said the producer group could be impotent for months to come.
“The big problem is that Iran has the presidency of OPEC in 2011 and is using it as a political tool,” said analyst Olivier Jakob of Petromatrix.
“The statements coming out of OPEC are currently irrelevant as Iran has kidnapped OPEC and we will have to wait for 2012 to maybe see OPEC work again as an institution.”
If the price falls too far, however, analysts predict OPEC could reunite as a force, just as it did at the end of 2008 when prices crashed below $40 a barrel.
The price collapse prompted OPEC to agree a record output cut of 4.2 million barrels per day.
That reduction theoretically remained in place until this month when OPEC’s failure to reach agreement leaves all OPEC members at liberty to pump whatever they can.
“This may go on for two-to-three meetings or even longer,” said Neil Atkinson, a director at energy research firm Datamonitor, of OPEC’s current loss of influence and disarray.
“But if oil demand continues to grow, you’ll get a situation where the call on OPEC could start to increase quite dramatically.”
After Iran moves aside as OPEC president, Iraq, which also opposed the Saudi-led push for an output increase at the June meeting, will take over at the beginning of next year.
Iraq was represented at Monday’s talks by its OPEC governor Falah Alamri.
By Michael Shields and Alex Lawler
(Additional reporting by Daniel Fineren in Dubai; writing by Barbara Lewis; editing by James Jukwey)