Vienna’s reputation as the home of classical music will play second fiddle to the oil and gas industry next week as it hosts two critically important meetings which will potentially shape the future outlook.
Monday, November 24, marks the deadline for Iran and the P5+1 countries to reach agreement over Tehran’s nuclear programme, which follows several weeks of courtship between Barak Obama and Ayatollah Ali Khamenei, Iran’s supreme leader.
If Iran agrees to abandon any non-peaceful nuclear ambitions and the long-standing sanctions are lifted, around 4 million barrels of oil per day are expected to enter into the world market, which is a worrying prospect when you consider the recent surge in supply from North America and an ever weakening demand in Asia.
With this deadline looming, I was surprised while attending ADIPEC in Abu Dhabi recently to hear BP CEO Bob Dudley caution attendees of the global industry forum against “over-reacting” to current low prices, especially as the company recently announced a cost reduction exercise in the North Sea.
BP isn’t the only one tightening purse strings: last week ConcoPhillips warned of job losses in the UKCS, in line the likes of Shell and Chevron which have shed hundreds of jobs in an attempt to deal with low oil prices and high overheads.
Three days after the Iranian negotiations, and in the same city, OPEC will hold its eagerly anticipated meeting on Thursday, November 27 to discuss the sharp decline in oil prices since the summer and whether or not to urge a reduction in production from its member countries. Ecuador and Venezuela are expected to ask members of the organisation, who are responsible for around 40% of the global supply, to reduce excess output. According to Bloomberg show data, OPEC pumped 30.97 million barrels per day in October, exceeding its collective output target for the fifth straight month.
Saudi Arabia, the most powerful member of OPEC, has argued against an output cut although it is clear that the current low prices are affecting a number of the member countries. Will those against a production drop be willing to accept it for the greater good of all?
Whatever decisions are taken next week in the historic Austrian capital, by Friday the global oil industry will have a greater understanding of the challenges and opportunities it faces in the months and years ahead.