Since the launch of its strategy to revive global oil markets three years ago, one of the biggest challenges faced by OPEC and its allies is that not all the producers have pulled their weight.
In the subtle diplomacy of Saudi Arabia’s new energy minister, they might at last have found a solution.
Oil prices have this year slid about 16 percent from a high in April, even as the 24-nation coalition has cut production to check a glut threatened by faltering demand and surging US shale oil.
A big part of their struggle has been that some producers in the accord, most notably Iraq and Nigeria, have ramped up output rather than reduced it as promised.
A meeting of the group in Abu Dhabi on Thursday signaled that they intend to turn the page.
Officials from both errant countries addressed its closing news conference with solemn assurances that they would meet their commitments in full.
While Iraq and Nigeria have promised in the past to mend their ways, this time seemed different — and the explanation for that might lie with Saudi Arabian Prince Abdulaziz bin Salman, appointed less than a week ago as energy minister of Saudi Arabia, OPEC’s biggest member.
It was the prince, whose experience in brokering oil negotiations behind the scenes spans three decades, who gently but firmly persuaded Iraqi and Nigerian officials to finally tow the line, OPEC secretary-general Mohammad Barkindo said.
“He was born into power, he understands power — when to use it and when not to use it,” Barkindo, who has known the prince since the 1980s, said in an interview on Thursday.
Key members of the alliance known as OPEC+, which unites OPEC nations and nonmembers, gathered in Abu Dhabi’s gold-bedecked Emirates Palace hotel this week to review whether their production cuts are working.
Prince Abdulaziz, rather than summoning Iraqi Minister of Oil Thamir Ghadhban to his room for a rebuke, asked to visit his counterpart for guidance as he settles into the new role, Barkindo said.
The gentle approach “disarmed” Ghadhban and steered the Iraqi to publicly pledge an output cut of 175,000 barrels per day.
“It was quite a remarkable public display of atonement,” RBC Capital Markets chief commodities strategist Helima Croft said.
She credited the prince’s “deft and subtle performance” for the achievement.
Getting that promise likely built on efforts by Saudi Crown Prince Mohammad bin Salman, heir to the throne and Prince Abdulaziz’s half-brother, who called Iraq’s prime minister last week.
Making the OPEC+ deal a success is crucial for the kingdom, which the IMF estimates requires an oil price of US$85 per barrel to balance its budget, compared with current market levels of about US$60.
Plans to sell part of state-run oil giant Saudi Arabian Oil Co only add to the pressure it faces to bolster crude markets.
The real proof of whether Riyadh has succeeded will only arrive in the coming weeks, when estimates from consultants and media agencies will show if Iraq and Nigeria have met pledged cuts.
A bigger test of Prince Abdulaziz’s leadership skills will come in December, when OPEC and its partners will need to decide whether to cut production even more deeply to prevent a new surplus next year.
The Saudi Arabian minister might also need to work hard to ensure the continued cooperation of Russia, the biggest non-OPEC producer in the accord.