When oil ministers from OPEC’s twelve member countries meet in Vienna next month for their biannual summit, they’ll do so without a concrete long-term plan to discuss. As Bloomberg reports, the cartel’s board of governors was unable to hash out a draft strategy at its latest meeting, which will in effect limit what ministers can map out when they convene in two and a half weeks:
Governors of the 12-member group couldn’t agree on the final draft of the plan at a meeting in Vienna earlier this month, the delegates said. The governors disagreed on clauses suggested by some members, including about curtailing output, setting production quotas and finding ways to maximize OPEC profit, according to the delegates.
OPEC ministers are to meet on Dec. 4 to assess the oil market and the group’s output policy. Venezuela and Algeria are among OPEC states most affected by the slump in oil price and have long urged fellow members to curb production and support prices. Saudi Arabia, the world’s largest crude exporter, led the group to switch its strategy in November 2014 to focus on pressuring competitors such as U.S. shale producers and reclaiming market share.
Riyadh has pushed heavily for a do-nothing strategy in the face of plunging crude prices over the past 17 months or so, opting to compete for market share rather than set a price floor by constricting supply. The Saudis can afford to do that—for now—because of their enormous sovereign wealth fund, but OPEC’s poorer petrostate members aren’t as well prepared to weather this storm. Venezuela and Algeria have been the most outspoken in their disapproval of the cartel’s current tack, in large part because both countries require oil prices in excess of $100 per barrel just to balance their budgets.
By advocating inaction, the Saudis are hoping to cede the mantle of global swing producer to higher-cost suppliers (read: U.S. frackers), but that’s not sitting well with all of its members. The longer this bearish market persists, the more tension we’re going to see within the cartel. And remember: New supplies of Iranian crude are set to come online as soon as Western sanctions are lifted.