Falih charm offensive
slowly wins back OPEC for Saudis
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[June 03, 2016]
By Dmitry Zhdannikov, Rania El Gamal and Reem Shamseddine
VIENNA (Reuters) - Russian oil billionaire
Vagit Alekperov isn't easily swayed, but Saudi Arabia's new Energy
Minister Khalid al-Falih achieved it this week.
Intense diplomacy by the soft-spoken Falih at his first OPEC meeting -
with his speech peppered by words such as "gentle approach", "no shocks"
and "consensus" - has persuaded Alekperov that OPEC is more alive than
dead.
"The fact that OPEC agreed on its new management shows they want to
regain their coordinating role. The cartel will perform market
management again," Alekperov, chief executive of Russian energy firm
Lukoil, said after meeting Falih and Iranian Oil Minister Bijan Zanganeh
separately in Vienna.
On Thursday, OPEC could not agree to set a clear oil-output target as
Iran refused to limit its own production.
But the meeting was relatively peaceful and free of the usual clashes
between political rivals Saudi Arabia and Iran, with Falih promising not
to flood the market and to listen to Tehran.
In a rare compromise, OPEC also decided unanimously to appoint Nigeria's
Mohammed Barkindo as its new secretary-general after years of friction
over the issue. Oil prices stood flat at $50 a barrel on Friday, up 80
percent from their January lows.
Falih, who in April succeeded veteran Ali al-Naimi, was the first OPEC
minister to arrive in Vienna.
He met most fellow colleagues on the sidelines, spent several hours with
independent OPEC analysts and held a long news conference with
reporters.
"If you want to call it (OPEC) a talking shop - I have no problem with
that. But I think it's going to do a lot more than talking. We are going
to do coordination and cooperation ... to achieve market objectives,"
Falih said on Thursday.
DRIVERLESS CAR
The nature of Thursday's meeting surprised many OPEC watchers, who have
grown used to acrimonious gatherings.
Falih's ultimate boss, Saudi Deputy Crown Prince Mohammad bin Salman,
effectively scuppered plans to clinch a global production freeze in the
Qatari capital of Doha in April.
Prince Mohammad said Riyadh would not agree to the deal, which would also have
involved non-OPEC Russia, if Iran didn't join in despite Tehran insisting it
wants to regain market share after the lifting of international sanctions
earlier this year.
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Saudi Arabia's Energy Minister Khalid al-Falih (C) arrives for a
meeting of OPEC oil ministers in Vienna, Austria, June 2, 2016.
REUTERS/Leonhard Foeger
"After Doha, oil markets were beginning to look like a driverless car. That
needed to change," said a source familiar with Saudi thinking.
A non-Gulf OPEC source said Riyadh realized it needed OPEC unity because the
group's fight for market share against higher-cost producers, such as U.S.
shale, was taking longer than expected when formulated in 2014.
"The Saudis trashed OPEC in Doha. But they realized they don't want to throw
away decades of OPEC history and decided to be more cooperative," said Gary
Ross, founder of U.S.-based Pira consultancy, who came to Vienna together with
other OPEC watchers and analysts for meetings.
"The Saudis definitely decided to change tack after Doha as they were concerned
that people were doubting the viability of OPEC. I think this softer approach
will last," said Amrita Sen, who also came to Vienna.
Falih acknowledges that Riyadh realized it needs OPEC.
"The markets can ultimately balance themselves but as we have seen, when we rely
on markets alone it is extremely painful for everybody," he said on Thursday.
"I think managing in the traditional way that we have tried in the past may
never come again ... We will not go with setting a price target for OPEC ... But
(we should be) coordinating strategies and trying to understand what each of us
can and cannot do."
(Additional reporting by Alex Lawler and Shadia Nasralla; Writing by Dmitry
Zhdannikov; Editing by Dale Hudson; Editing by Dale Hudson)
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