The one-day Jeddah Summit chaired by Saudi Arabia’s King Abdullah met with a mixed reaction as delegates left to report on the outcome.
Despite a strong turnout; 35 countries sent representatives, including UK Prime Minister Gordon Brown, as did 25 international oil companies and seven multinational organisations, delegates failed to reach a consensus on tackling the problem.
Describing the problem as ‘chronic’ prior to the conference, Saudi’s acting Oil Minister Prince Abdul Aziz bin Salman had stressed that ‘no immediate solution’ was in the air.
‘We are raising production according to market demand,’ Prince Abdul told reporters, ‘we have been raising production for months and we will meet customer demands.’
‘The key is the price at which they sell; they need to discount it and make it attractive,’ countered Sarah Emerson of Energy Security Analysis. ‘I don’t think that the issue is volume, I think it is price.’
This neatly presents the two facets to the oil price debate. The US and the UK, among others, are desperate for Opec to raise output, hoping that this will calm market fears and allow prices to settle.
The major producers, on the other hand, place the blame for the soaring prices on speculators, saying that simply increasing output will have no effect – it is the markets which need to be controlled.
The meeting ended with no new announcement by delegates. The official Saudi confirmation of a 200,000 bpd increase was swallowed by the news that renewed attacks by Nigerian rebels had forced the closure of pipelines in the country’s delta region.
So the biggest Saudi output in 30 years, 9.7 million bpd, was nullified by Nigeria’s output falling to its lowest in 25 years, with 340,000 bpd cut from production.
‘There is a danger that the markets will be disappointed and the price will increase again,’ predicted German Minister of the Economy Michael Glos, as analysts noted that the Saudi increase had already been absorbed my market fluctuations.
Oil price increase
As though to prove this, the price of crude oil rose above $136 a barrel, close to last week’s high mark.
The increase was accentuated by Venezuela, Algeria, Iran and Qatar all saying that they would not raise production, on the grounds that the global supply was enough to meet market demands.
Libya went so far as to announce that it would consider reducing its own production in response to the Saudi increase.
With major oil companies forced to cut down Nigerian production, increased tensions between Israel and Iran, and no common agreement on what the next step for global economies in response to the crisis could be, the price of oil looks set to continue rising in the short and medium term.
When asked if he thought that prices looked likely to fall following the meeting, Opec President Chakib Khelil summed his feelings up with one succinct phrase: ‘I don’t think so.’