Cartel or talking shop? OPEC awaits Saudi ruling

Thu May 26, 2016 9:06am EDT
 
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By Rania El Gamal and Alex Lawler

DUBAI/LONDON (Reuters) - For those seeking guidance on Saudi Arabia's thinking regarding the future of OPEC, the last few weeks' agenda of the new Saudi energy minister, Khalid al-Falih, might offer a few clues.

Since his appointment on May 7 as head of a new mega-ministry - overseeing energy, industry, mining, atomic power and renewables - Falih has toured six state firms, met the South Korean premier, the Canadian foreign minister and Gulf industry ministers, and opened a gas turbine plant.

To fellow members of the Organization of the Petroleum Exporting Countries, that speaks volumes. Unlike his predecessor Ali al-Naimi, Falih may not have much time for OPEC. The group meets on June 2, its first talks with the new minister in attendance.

For oil-price hawks such as Iran, Algeria and Venezuela, fears are growing that the 56-year-old OPEC is losing its role as an output-setting cartel and turning into a talking shop.

"Saudi Arabia killed OPEC and buried it," a senior OPEC source from a non-Gulf producer said.

"In OPEC, they go for (including) Indonesia and Gabon to convert OPEC to a forum," the source said, referring to OPEC's decision, supported by Riyadh, to include minor producers.

As a historic reminder, OPEC last decided to change output in December 2008, when it cut supply amid slowing demand due to a global financial crisis. Between 1998 and 2008, OPEC made 27 changes to output.

For decades, Saudi Arabia, Vienna-based OPEC's largest producer and de facto leader, had a preferred range for oil prices and, if unhappy, would try to orchestrate a group-wide production cut or increase.   Continued...

 
Khalid al-Falih, the new Saudi Minister of Energy, Industry and Mineral Resources Ministry, is sworn in by Saudi King Salman (not seen) in Riyadh, Saudi Arabia May 9, 2016.    Saudi Press Agency/Handout via REUTERS