Tehran and Caracas are working to present a united front against Riyadh to advocate for crude production cuts in an attempt to stop the precipitous decline in global oil prices. The New York Times reports:
With President Nicolás Maduro of Venezuela by his side, President Hassan Rouhani of Iran urged members of the Organization of the Petroleum Exporting Countries, or OPEC, to “neutralize schemes by some powers against OPEC and help stabilize an acceptable oil price in 2015.” Mr. Maduro also called for OPEC’s cooperation in stabilizing oil prices. […]“We are making efforts to create a consensus among OPEC members and other oil-producing states, including Russia, to cooperate and use novel mechanisms to reverse the oil price to an acceptable level,” Mr. Maduro was quoted by Iranian state television as saying.
Maduro’s plea fell on deaf ears, however, as the Saudis seem content to ride out the bear market for the time being. Reuters reports:
“[F]rom what I see there is no sign of cutting production from the Gulf states,” a Gulf OPEC delegate said. “The only solution is to have the market absorb this surplus and the extent of that will be assessed by OPEC by ministers during their meeting in June.”
Venezuela and Iran could get every other OPEC member on their side and would still find themselves going hat in hand to Saudi Arabia. Riyadh is far and away the largest OPEC producer, and more importantly it is also the only member with the real capability to scale back production enough to stop the price plunge. Venezuela and Iran have much higher breakeven prices than does Saudi Arabia—estimated to be roughly $120, $140, and $90 per barrel, respectively—so it’s understandable that they’re the loudest agitators for production cuts. But the Saudis are content for now to conduct business as usual, and won’t lose sleep if that ends up crippling the economy of their biggest regional rival.