On 12 December, OPEC agreed to retain its 30-million barrel-a-day output target and meet next on 31 May. But there was bickering among the Organization of Petroleum Export Countries' top three producers - Iraq, Saudi Arabia, and Iran. Many market observers point out to an emerging new rivalry in the group, pitting up-and-coming Iraq against kingpin Saudi Arabia. Adding to the oil cartel’s problems is weak oil demand, the rise in oil output from the United States, new shale technologies and increased natural gas exports.
ExxonMobil’s Outlook for Energy: A View to 2040, which was released on 11 December, points out that the global energy landscape will evolve significantly as regional demand-and-supply patterns shift in the coming decades.
Fadel Gheit, a senior energy analyst at Oppenheimer in New York, told New Europe on 13 December that OPEC members cannot afford any discord. Energy demand will continue to be weak. “The days of 4% or 5% increase in demand are gone. They will be lucky to see 1% or less year-over-year global demand growth,” he said, adding that this trend will continue because of innovation, technology, conservation and environmental pressure. He stressed that technology has opened up enormous resources and the shale revolution in the US and Canada will eventually spread throughout Europe, Asia and the rest of the world.
Following the structural change in the energy markets, the OPEC countries have to get back to a more realistic expectation. “Oil prices are inflated. They are in no way supported by market fundamentals,” Gheit said. He noted that if it were not for the tension and speculation, oil prices would be closer to $70 or even lower. “There is no justification for $100 Brent or $85 WTI,” Gheit said, adding that the OPEC countries will see their oil revenue decline over the years. “Once the new shale technology really spreads in Europe, the game is over for OPEC in my view. The game is over because all these countries will develop natural gas,” he added. He pointed out to massive natural gas potential discoveries in Cyprus, Israel, Mozambique and Australia.
“I have a very dim view of OPEC. I really think that they have not kept up with the times and they will continue to live backwards,” the Oppenheimer expert said.
On 12 December, OPEC ministers failed to agree on a new secretary general and had asked Libya’s Abdalla el-Badri to stay in the post for another year. Gheit said it doesn’t matter who the secretary general is because “at the end of the day, Saudi Arabia is basically holding the key - but how long nobody knows. Because I tell you, Saudi Arabia is not 100% immune to what is happening in the region. There is tremendous anger, dislike, desperation against the regime”. Saudi Arabia reportedly needs an unprecedented $630 billion a year of oil revenue to balance its budget. "That’s nonsense. All they have to do is to redistribute this wealth among people,” he said.
Gheit pointed out to the corruption in Iraq. “They had billions of dollars heading in foreign bank accounts and they’re bickering over all these things,” he said. “The Iranian situation is the same. It’s a corrupt country; it’s basically the clergy controlling the country.”
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