Major crude producers are set to meet on Sunday to discuss how to stabilise a volatile oil market amid rising tensions between the United States and Iran in the Gulf, which threaten to disrupt supply.
But the subject of Iran, which is not present, will dominate the one-day meeting of the OPEC+ group, formed by OPEC members and its new petro allies.
The meeting also comes as the full impact of reinstated US sanctions against Tehran kicks in, slashing the Islamic Republic’s crude exports.
Hours before the meeting in Jeddah, host Saudi Arabia said it does not seek war with Iran but is ready to defend its interests.
The meeting is set to make recommendations ahead of a key OPEC summit in late June, to be attended by Iran.
President Donald Trump said last month that Saudi Arabia and other OPEC members had agreed to his request to boost oil production in order to tamp down rising prices.
Massive drops in exports by Iran and Venezuela plus output cuts of 1.2 million barrels per day, implemented by the OPEC+ group since January, have cut supply.
But UAE Energy Minister Suheil al-Mazrouei said inventories were still building up.
He told reporters Saturday that the job of balancing the market was not yet complete, a hint that any ramp-up in production could send prices crashing as they did in late 2018.
OPEC and the International Energy Agency said earlier this month that global oil supply fell in April due to tightened US sanctions on Iran and OPEC+ production cuts.
The IEA said Iranian crude production fell in April to 2.6 million bpd, down from 3.9 million before Washington announced in May 2018 it would withdraw from the 2015 Iran nuclear deal and re-impose sanctions.
Iran’s output is already at its lowest level in over five years, but could tumble in May to levels not seen since the devastating 1980-1988 Iran-Iraq war.
Energy intelligence firm Kpler sees Iranian exports plunging from 1.4 million bpd in April to around half-a-million barrels in May – down from 2.5 million in normal circumstances.
Venezuela’s output is also tumbling, down by over half since the third quarter of last year.
Kpler says data shows OPEC+ members have kept to agreed production cuts.
But exporters fear a rush to raise production to plug the gap left by Iranian exports could backfire, triggering a new supply glut.
Sunday’s meeting comes amid soaring Gulf tensions after the tanker “sabotage” and the drone attacks on a key Saudi crude pipeline.
Both attacks targeted routes built as alternatives to the Strait of Hormuz, the conduit for almost all Gulf exports.
Iran has repeatedly threatened to close the strait in case of war with the US, which announced this month it was sending an aircraft carrier and strike group to the region.
Saudi Arabia accused Iran of ordering the pipeline attacks, targeting “the security of oil supplies… and the global economy”.
Adel al-Jubeir, Saudi minister of foreign affairs, said Sunday his country does not want war with Iran, but was ready to defend its interests.
Saudi Arabia called on Saturday for urgent meetings of the Gulf Cooperation Council and the Arab League to discuss escalating tensions, government news agency SPA said.
It also said Crown Prince Mohammed bin Salman had spoken with US Secretary of State Mike Pompeo about enhancing security in the region.