x Abu Dhabi, UAEThursday 27 July 2017

Baroque charm masks concern for the Opec

Opec ministers met in Vienna, after reaping one their biggest windfalls ever. But alternative sources of oil and gas are a threat to demand.

Members of Opec are concerned over a weakened world economy in which growth is slowing even in China, and has come to a near standstill in developed nations. Both threaten oil demand. (AP Photo/Ronald Zak)
Members of Opec are concerned over a weakened world economy in which growth is slowing even in China, and has come to a near standstill in developed nations. Both threaten oil demand. (AP Photo/Ronald Zak)

VIENNA // The former rulers of the Habsburg dynasty stare down from their portraits high on the walls of Hofburg Palace, reminders of the power that once emanated from these marble halls.

Six centuries after their rise to reign, this baroque monument houses a conference centre that every two years hosts Opec and its followers - a centre of power in its own right.

As recently as January last year, Opec's linchpin Saudi Arabia was targeting an oil price of US$75 a barrel, and watched in amazement as futures markets soared above $100.

Today, many Opec ministers consider $100 an appropriate price floor, and some are pushing for a range as high as $120.

Thanks to that rally, Opec enjoyed a windfall last year, netting at least $1 trillion (Dh3.67tn), the group's highest take ever.

And the wealth and power were in full view last week. Outside the palace, rows of glistening black Mercedes dropped-off the delegate.

Ministers traded in their kanduras for dapper suits and met in rooms hidden behind mirror-clad walls. Oil analysts lunched on salmon and sorbets before taking home porcelain plates from Limoges, gifts from Saudi Aramco.

In the 1,000 square metre Festival Hall, Hofburg's biggest, golden chandeliers illuminated cornices carved with the clusters of plump grapes - an ample harvest.

The ministers, however, are aware the good times may not last forever.

A weakened world economy in which growth is slowing even in China, and has come to a near standstill in developed nations, threatens oil demand.

"An obvious manifestation of this crisis is the economic deceleration in the developed countries, which has turned the possibility of a collapse in oil demand into a clear and present danger," warned Rafael Ramirez, the oil minister of Venezuela, which alongside Iran leads the group's price hawks.

In the long term, Opec crude has to compete with oil and gas North American companies are unlocking from shale formations, and nations from Poland to China are gearing up to do the same.

Major oil companies are stretching other drilling frontiers in the Russian Arctic and fields buried under kilometres of ocean and salt layers off Brazil's coast.

"Technology is pushing back the peak of oil," Ryan Lance, the chief executive of ConocoPhillips told ministers.

ayee@thenational.ae

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