London — The last time OPEC and its partners met, in Vienna in June, they were on the receiving end of a thunderous tweet from US President Donald Trump, warning from across the Atlantic not to let oil prices rise too high.
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At an April meeting of the six-country OPEC/non-OPEC monitoring committee in Saudi Arabia, Trump also castigated the producer bloc via Twitter for not pumping more.
So, as the coalition prepares to meet again on Sunday in Algiers, ministers and delegates will be sure to keep an eye on Twitter as they discuss how to implement their agreed 1 million b/d production rise and whether to make permanent their market management deal beyond its expiry at year-end.
The US counts Saudi Arabia, OPEC's de facto leader, as a key ally and will be keen not to see a price surge ahead of the US midterm elections November 6, with Trump's Republican Party at risk of losing control of Congress. Many OPEC delegates have, however, privately been unhappy about Trump's bombastic tweets making it difficult to maintain cohesion within the group, as Iran and Venezuela have railed against capitulating to the president.
"It is hard for the US/Trump to complain, because it is the US' secondary sanctions on Iran that is driving the oil market tightness," analysts at Mizhuo Securities said in a note. "But we expect the tweets will come nonetheless as we head into the mid-terms. OPEC is a pre-packaged election season bogey for all politicians, let alone the Master Tweeter," they added.
Ministers from more than 20 of the 25 countries in the OPEC/non-OPEC coalition are expected to attend the Algiers summit.
With oil prices hovering around $80/b amid indications that Saudi Arabia sees a price rise in the months ahead as inevitable, the group finds itself with a tough balancing game on its hands.
US sanctions on Iran are set to hit Tehran's oil sales on November 5, with S&P Global Platts Analytics forecasting that up to 1.4 million b/d of Iranian supplies will be shut-in. Venezuela's cratering economy and Libya's tenuous security also present supply risks to the market.
OPEC spare capacity is tight and any further moves to boost production could squeeze the bloc's ability to mitigate any market disruptions, whether due to geopolitics or natural disasters.
But allowing prices to rise too high could lead to a drop in oil consumption, with some already forecasting tepid growth in 2019 global demand.
As usual, the focus will be on Saudi energy minister Khalid al-Falih, who has talked of OPEC becoming more like a central bank for oil. As such, his words will be parsed by the market for insights into the country's output plans going forward.
"We believe OPEC will, at the very least, signal that it plans to do more in light of Venezuela declines and expected impact of US sanctions on Iran exports," Hedgeye senior analyst Joe McMonigle said. "The goal is to keep oil prices below $80/b and preferably in the mid-$70s range until after the US election."
Falih met with Russian counterpart Alexander Novak last weekend to align their positions, with the two ministers saying in a joint statement that they remained committed to "ensuring the adequacy of oil supplies, especially considering market uncertainties on the horizon."
The two countries have already boosted output by a combined 800,000 b/d since May.
Falih also met last week with US Energy Secretary Rick Perry, who praised the efforts of Saudi Arabia and Russia to keep the market well-supplied. Saudi Arabia, Russia and the US are the world's three largest oil producers.
"I think Saudi Arabia is comfortable with the prevailing price until its customers are not," said Matt Reed, vice president of Middle East consultancy Foreign Reports. "It is humble enough to know it can't dictate the price of oil. The simpler and achievable goal is to avoid disastrous price spikes, which they can do by coordinating with other producers."
One glaring absence from the Algiers proceedings will be Iranian oil minister Bijan Zanganeh, who has railed against Saudi Arabia and Russia increasing production as Iran's market share is threatened.
Iran is already seeing many customers cut their purchases in advance of the sanctions deadline for fear of being hit with US penalties.
In staying away from the meeting, Zanganeh could complicate plans by OPEC to institutionalize its partnership with Russia and the other non-OPEC participants in its supply accord. Saudi Arabia has been especially keen to keep Russia in the fold, to boost the market clout of the producer group and strengthen burgeoning bilateral ties.
"Any decision to act collectively on production may be pushed to the next official OPEC meeting in December," Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, said. "This does not preclude the Algiers meeting laying down the ground work. However, countries like Iran and Venezuela could end up opposing any increase if this is seen as grab in their market share."
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