OPEC Secretary General Adullah al-Badri attends a session of the OPEC International Seminar in Vienna on Thursday, June 14.HEINZ-PETER BADER/Reuters
OPEC kept oil output limits on hold on Thursday at 30 million barrels a day, powerless to do anything other than hope top producer Saudi Arabia will scale back supplies unilaterally soon to stem a $30 (U.S.) slide in prices.
Several in the Organization of the Petroleum Exporting Countries called on Saudi to cut back to bring supply down to its agreed collective limit to defend $100-a-barrel crude.
"There is at the moment an unjustified rise in the organization's production," said Algerian Oil Minister Youcef Yousfi.
Price moderate Riyadh though is keen to prevent high fuel costs hampering a return to stronger economic growth in the West.
Extra Saudi oil is largely responsible for lifting OPEC output to 31.6 million bpd, well in advance of the group's formal target, first set in December.
Oil prices have dropped from a $128 peak for Brent crude in March to $97, in part because the economic outlook has darkened but also because of increased Saudi output that in April set a 30-year high of 10.1 million barrels a day.
Dependent on oil above $100 to balance budgets, price hawks in OPEC worry crude could keep falling.
"There is a risk that prices will fall, uncontrolled, to levels from which it will be very difficult subsequently to bring them back," said Mr. Yousfi.
Iran, often at odds with Saudi Arabia at OPEC, is displeased that higher Saudi output has pushed oil prices down just as its exports drop because of Western sanctions against its nuclear program.
"We object to the drop in prices," said Iranian Oil Minister Rostam Qasemi.
"We are not happy with oil below $100," agreed Faleh al-Amri, Iraq's governor to OPEC, underlining an emerging consensus between Tehran and Baghdad on OPEC policy.
Higher Saudi output has lifted world oil inventories rapidly, a deliberate move by Riyadh to counter the possibility that Iranian exports fall heavily when a European Union embargo on Tehran starts next month. Iran's production is already down to a 20-year low as buyers seek alternatives.
Saudi Oil Minister Ali Naimi has called the extra Saudi volumes and consequent oil price decline "a kind of stimulus" for the world economy. His advisers say Riyadh is engaged in a balancing act to raise stocks to cover for Iranian losses while taking into account the prospect that the fragile world economy will slow oil demand.
Even Saudi Arabia's closest Gulf Arab allies are showing signs of discomfort at the decline in prices.
"A little bit much," said UAE Oil Minister Mohammed al-Hamli's of supplies.
Analysts say risks are growing that prices could fall further if Saudi doesn't cut back.
"There is a surplus in the market. Most of the surplus has gone into storage, both fixed and floating, so the market in a way hasn't felt that yet," said former Algerian oil minister Chakib Khelil, now a consultant.
"This idea of trying to anticipate the shortfalls from Iran could backfire. If demand weakens because of the economic situation then you have a weak global economy and oversupply in the market."
Oil prices though are anything but predictable, largely because, on top of opaque supply and demand fundamentals, markets have to take into account the politics of producer countries.
Iran is the main uncertainty for oil prices – the impact of sanctions on its oil sales, negotiations with world powers over its nuclear progamme that resume in Moscow shortly and the possibility that Israel might launch an attack on its nuclear facilities.
"History tells us that a global financial collapse could see oil prices fall to $50 a barrel and below whilst an attack on Iran take them to $150 and above," said David Hufton of London oil brokers PVM.