x Abu Dhabi, UAESunday 23 July 2017

'Healthy competition' to lead Opec

Opec ministers face a tough discussion today over the future leader of the organisation.

Opec can name an interim secretary general if it cannot agree on a candidate. Heinz-Peter Bader / Reuters
Opec can name an interim secretary general if it cannot agree on a candidate. Heinz-Peter Bader / Reuters

Opec ministers face a tough discussion today over the future leader of the organisation.

Abdalla El Badri, a former Libyan oil minister known for his diplomatic skill in shepherding members to consensus, reaches his two-term limit at the end of this year, leaving a choice between three candidates at today's output meeting.

The Saudi Arabian candidate, the oil ministry adviser Majid Al Muneef, is in the running and challenged by a candidate from Iran and Thamer Ghadban, a former Iraqi oil minister seen as a possible compromise between price hawks represented by Tehran and doves led by Riyadh.

With such a divisive race, Opec delegates are prepared for there to be no winner at all.

"This is a healthy competition," Mohammed Ali Khatibi, the Iranian Opec governor, told The National. "At the end, if they cannot all come to this selection then there is just one way - that is the temporary decision."

Opec can name an interim secretary general if it cannot agree on a candidate.

A fourth candidate from Ecuador bowed out last week, while Angola's oil minister told Bloomberg that the Iranian nominee, the former oil minister Gholam Hossein Nozari, had already "given up". Mr Khatibi did not say Iran had left the race.

Jose Maria Botelho de Vasconcelos, the Angolan minister, said he would back Iraq because of the state energy company Sonangol's ties there.

"Sonangol has a relationship with Iraq and is present in Iraq," he said. "So it's natural that our vote tends to go the Iraqi candidate."

The seat would be a coup for Iraq, which is ramping up production after war and sanctions and is looking to increase its sway in Opec and international oil markets.

Under an exemption from the group's output ceiling for decades because of constrained production, it came back under the quota system last year and hopes to match its 1979 record of 3.8 million barrels per day (bpd) next year.

Analysts expect Opec to keep its output target intact at 30 million bpd.

"Oil prices are well above levels that would concern key members," said Michael Rothman, the president of Cornerstone Analytics, a firm in the United States. "Spare capacity being largely limited to Iran's shut-in production means there continues to be no fighting for market share."

Increasing production of shale oil in North America, coupled with the global economic slowdown, has led to a build-up of crude stocks.

"It is clear from past actions that Opec ministers will not respond to rising inventories unless oil demand and prices decline at the same time," said Anas Alhajji, the chief economist at NGP Energy Capital Management. "This is not the case today."

Opec as a whole pumped its lowest amount in a year - 30.78 million bpd - the group reported yesterday as Saudi Arabia tightened the taps in the face of dissipating demand growth in the economic slowdown.

Prices have remained in a sweet spot this year that price hawks and doves alike say is good. Brent futures were trading yesterday slightly up at US$108.

"I hope that that range will continue and everybody will be satisfied," Mr Khatibi said before departing for Vienna. "The market in the future will be more stable than this year, I hope."

ayee@thenational.ae