Infighting at Opec opens up rifts
In the early days of the Libyan uprising, the world's top oil producers and consumers could be found in Riyadh celebrating their frank discussions on energy co-operation.
Since that gathering in February, the conflict and its six-month toll on energy markets have chipped away at producer-consumer relations while exposing rifts between the world's major oil exporters.
Libya, a member of Opec, pumped 1.6 million barrels per day (bpd) - just 2 per cent of the world's oil - but European refiners prize its light, high-quality crude. Its loss from the market sent the price of the benchmark crude Brent from about US$100 a barrel in early February to $127 in April. "The price levels are definitely too high for the global economic recovery," warned Fatih Birol, the chief economist for the International Energy Agency (IEA), the organisation in Paris that represents 28 industrialised oil-importing nations.
It was Opec's responsibility, consumers argued, to replace the Libyan shortfall.
By May, the IEA had resorted to threatening Opec that it was considering "all tools" at its disposal - a veiled reference to its member countries' crude stockpiles capable of flooding the market with 2 million barrels of oil every day for two years.
The pressure led Saudi Arabia, the world's top exporter, to lead the UAE and Qatar in pushing to increase the groups' production ceiling, a move likely to have put a dampener on prices.
But at an Opec meeting in June, Iran rallied six other nations, including Venezuela, to keep the output target intact, sending the message that an oil price above $100 was acceptable.
"The is one of the worst meetings we ever had in Opec," Ali Al Naimi, the Saudi oil minister, said after the group failed to reach a consensus in Vienna. Soon after, Saudi Arabia went solo and increased output above its Opec quota.
The IEA, in turn, unleash 60 million barrels of oil the following month from its member countries and the US. The move aggravated producers, including the Gulf states that had originally advocated an Opec increase.
When Opec next meets in December, all eyes will be on whether the rifts inside the organisation and between producers and consumers also ended with the Libyan conflict.
Published: August 28, 2011 04:00 AM