Saudi-Iran row cuts chance of Opec deal

 (Tu, January 12, 2016)

The collapse in relations between Saudi Arabia and Iran puts an end to speculation that the Organization of Petroleum Exporting Countries (Opec) could somehow agree production curbs to lift the price of oil anytime soon.

A Reuters survey of Opec production showed that Saudi Arabia ended 2015 with its output at full tilt, with no sign of cutting supply to make room for Iran, which plans to ramp up its own output when international financial sanctions are lifted this year.
According to the survey, compiled from shipping data, oil company figures and industry experts, Saudi production for December averaged 10.15 million barrels per day (mbpd).

That means it was above 10 mbpd for nine straight months, the longest period of sustained production above that threshold for decades. The determination by the world’s biggest exporter Saudi Arabia to defend its market share despite a global glut has helped drive oil prices to their lowest in 11 years.
Meanwhile, the lifting of sanctions on Iran in line with a nuclear agreement is expected to provide the biggest increase in supply of 2016. The world is now producing 1.5 mbpd more than it is consuming, and Iran is promising to add another mbpd to supply over the next 12 months.

The Opec failed to agree any caps on production at its annual meeting in Vienna last month, amid acrimony between Saudi Arabia and Iran, the Gulf region’s main Sunni and Shi’ite powers.
If there was still any suggestion that the two rivals might somehow overcome their animosity to agree to manage supply this year, it was buried when Riyadh called off diplomatic ties with Tehran over Iran’s response to the execution of Saudi Shi’ite cleric Nimr Al Nimr.

Several Opec delegates told Reuters they now saw no chance of any improvement in relations between Opec members, which have been already very low over the past months.

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