The OPEC meeting is only a week away, but the chances of a positive result are as remote as ever. Rising oil prices, the heightened rivalry between Saudi Arabia and Iran, and Saudi Arabia’s willingness to go it alone will make a deal all but impossible.
First of all, Iran is not in a cooperative mood. According to the IEA, Iran has managed to boost oil production to 3.56 million barrels per day in April, its highest level since November 2011. Oil exports also jumped 600,000 barrels per day to 2 million barrels per day. Importantly, Iran’s output now stands at pre-sanctions levels, a key threshold that the Iranian government says it needs to reach before it would consider any cooperation on production limits with OPEC. However, Iran thus far does not see it that way, insisting that it still has more ground to make up.
More importantly, however, is Saudi Arabia’s shift in attitude. In a once unthinkable development, Saudi Arabia is backing away from OPEC. The cartel’s largest, most important, and most influential member will leave the group rudderless. Countless obituaries have been written about OPEC since November 2014, but the new direction that the Saudi monarchy is heading in all but ensures diminished influence for the oil cartel.
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