Venezuela to snub Saudi Arabia over call for Opec summit

Venezuela yesterday said it would snub Sunday’s oil summit in Jeddah, revealing the deepening rift within the Opec cartel over Saudi Arabia’s unilateral decision to call the meeting and increase its production.

Rafael Ramirez, Venezuela’s energy minister, said: “We believe all issues pertaining to production must be discussed in the upcoming Opec meeting in September.”

Venezuela is one of Opec’s more important members even though its oil production has suffered under Hugo Chávez, its populist president.

Iran, Opec’s second largest producer, is also upset with the Saudis. Mohammad Ali Khatibi, the country’s Opec governor, this week called any unilateral decision to raise output “a wrong action”.

“It seems people are slightly angry with Saudi Arabia making a unilateral decision. If it was Opec [announcing a rise in production], it would have had much more impact,” said an oil industry official. “If Venezuela is not [in Jeddah] and Iran does not want an increase, it’s very difficult.”

The split within the cartel is significant because it reduces the probability that other Opec countries will be willing to join Saudi Arabia in boosting production to ease high oil prices. Kuwait and the United Arab Emirates could conceivably announce small increases, but a deepening split in the cartel makes it less likely they will follow through, analysts said.

The division also means that Saudi Arabia, long Opec’s most powerful member, stands very much alone with little to shield it from the direct pressure emanating from Washington, London and the capitals of developing countries cracking under the burden of $130-$140 oil.

Diplomats working on the background paper to be presented at the meeting said it would be very broad. It would include few conclusions, since the main parties involved – the International Energy Agency (the developed world’s watchdog), Opec, Saudi Arabia and the International Energy Forum – were far apart on the issues of what had caused the price rise and what to do about it.

Mr Ramirez said the high global prices for oil were not caused by supply problems and any extra crude oil put on the market by Saudi Arabia would just end up in storage tanks around the world. Saudi Arabia is expected to increase its production by 200,000 barrels a day, boosting its supplies to about 9.7m b/d, about 11 per cent of the world’s total. However, that decision is not yet final.

Gholamhossein Nozari, Iran’s oil minister, is expected to repeat Tehran’s opposition to a unilateral Saudi production increase at the Jeddah meeting, although Iran would in fact benefit from a drop in prices because the dilapidated state of its refining industry means it imports much of its petrol.

Even traditional allies of Saudi Arabia have voiced unhappiness about the hastily organised meeting, which is expected to bring together about 40 ministers and more than 20 executives. Among those expected to attend are the chief executives of the world’s eight largest international oil companies by market capitalisation – ExxonMobil, Royal Dutch Shell, BP, Chevron, Total, ConocoPhillips, Eni and Repsol.