Oil producers meet in Jeddah amid rising tensions with Iran

OPEC
File Reuters

UNITED STATES (VOP TODAY NEWS) — OPEC oil exporters will hold an important meeting in Jeddah on Sunday to put prices on the fragile crude market on a path of stability amid tensions in the Gulf that could pose a threat to supply.

Oil-exporting countries will discuss the market situation and the extent to which countries have abided by a cut-off agreement reached last year, but Iran, absent from the meeting, will be at the top of the agenda at the one-day meeting.

Four ships, including three oil tankers flying two of them flagged Saudi Arabia, were “subversive” off the UAE a week ago, before Yemeni rebels close to Iran launched an attack against two major oil pipeline pumping stations in Saudi Arabia with drones.

Riyadh, the world’s top oil exporter, warned that the attacks “target the safety of energy supply to the world and the global economy,” but at dawn on Sunday it did not want a war with Iran.

The meeting will also take place after tougher US sanctions on Iran and its oil sector came into effect this month.

It is not expected to issue any decisions, but it may come out with recommendations before the meeting of the Organization of Petroleum Exporting Countries (OPEC) in June, which will involve Iran.

US President Donald Trump announced last month that Saudi Arabia and other OPEC countries had agreed to increase oil production in order to cut prices again.

Despite the drop in oil exports in Iran and Venezuela, and the agreement to cut output by 1.2 million barrels per day since January, UAE Energy Minister Suhail al-Mazroui said upon his arrival in Jeddah on the eve of the meeting that the global stock is still rising.

He stressed that the quest of producing countries to achieve a balance in the market has not yet reached its conclusion, in reference to any increase in production may push prices to decline immediately, as happened at the end of last year.

– Iran’s exports suffer –

The Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) announced this month that oil supplies fell in April as tougher US sanctions on Iran began and oil nations pledged to cut output.

Iran’s output fell to 2.6 million barrels in April, the lowest level in almost five years, after it was on the threshold of 3.9 before Washington announced its withdrawal from the nuclear agreement about a year ago.

Production may fall further in May to unprecedented levels since the war with Iraq between 1980 and 1988.

Iran’s exports fell from 1.4 million barrels in April to about half a million barrels in May, compared with 2.5 million barrels in the period before the US withdrawal from the nuclear deal, the energy consultancy Kepler said.

Venezuela’s output is also suffering from the turmoil in the country and has fallen more than half since the third quarter last year.

Kepler’s statistics show that the signatories to the cut-off agreement have complied, but exporting countries fear any increase in production could offset the shortfall caused by the absence of Iranian crude to backfire.

– Tensions in the Gulf –

Oil nations meet in Jeddah at a time of psychological warfare between the United States and Iran, while observers fear any Gulf events could have bigger repercussions for the region and oil supplies.

Iran has repeatedly threatened to close the Strait of Hormuz, through which 35 percent of the world’s oil supplies pass, if there is a war with the United States or serious developments in the Gulf.

Attacks on oil facilities in Saudi Arabia and the United Arab Emirates built to serve as alternatives to the Strait of Hormuz show that these routes may not be safe and may become targeted as tensions escalate.

Saudi Arabia on Thursday accused Iran of ordering the Yemeni rebels to attack its oil facilities.

On Saturday night, Riyadh called for two “emergency” Gulf and Arab summits in Mecca to discuss the attacks, a day before an Islamic summit hosted by Saudi Arabia.

Hours before the Jeddah meeting, Saudi Foreign Minister Adel al-Jubeir told a press conference in Riyadh that his country “does not want a war and does not seek it and will do everything it can to prevent this war, while at the same time confirming that if the other side chooses war, Will respond to it with all strength and firmness and will defend itself and its interests.”

Saudi Energy Minister Khalid al-Faleh said last month that his country was prepared to compensate Iran’s oil on the market, a move that would anger Iran and raise questions about the future of OPEC, in which Iran plays an important role.

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