Pioneer Natural Resources chairman Scott Sheffield—who is in Vienna for an international OPEC conference—warned that oil prices could jump to $100 a barrel if the cartel and friends don’t boost production.
“OPEC needs to come out with something — that they are going to phase in supply as they see supply from Iran, Venezuela and Libya come off the market,” Sheffield told reporters, as quoted by Bloomberg, adding that the production loss from these three OPEC members could reach as much as 1.4 million bpd in the coming months.
Commenting on oil prices, Sheffield said:
“One hundred dollars isn’t going to help OPEC, it’s not going to help us in West Texas. It will hurt demand, it will move investment to alternative energy around the world.”
Oil officials from OPEC and its allies started to arrive in Vienna for this week’s meeting, which is expected to be one of the most contentious summits in years, as Iran firmly opposes a Saudi-Russia-led production increase proposal, while a U.S. shale executive urged OPEC to act to prevent oil prices from surging to $100 that will hurt both the cartel and Texas producers as it would dent demand.
Saudi Arabia’s Energy Minister Khalid Al-Falih was confident that there would be an agreement at OPEC on Friday, saying today that “Of course we will have an agreement.”
Saudi Arabia and Russia are said to be proposing a production boost of 1.5 million bpd, which observers and OPEC sources think is just a starting point for negotiations to settle on a compromise at somewhere between 500,000 bpd and 700,000 bpd.
Ecuador’s Oil Minister Carlos Perez predicts the production boost would be around 600,000 bpd.
But Iran and Venezuela are leading a faction within OPEC that firmly opposes any production increase, spurred on by the fact that they are unable to boost their own production levels.
Iran is most vocal in expressing its opposition, and has said that it would veto any proposal for a production increase with the support of Venezuela and Iraq.
Iran’s Oil Minister Bijan Zangeneh said, “I don’t believe at this meeting we can reach agreement.”
The Iranian oil minister also told reporters today that one way of “resolving the situation” would be overachievers to stop exceeding their targets in the production cuts. But Iran’s OPEC Governor Hossein Kazempour Ardebili said that Iran would only (possibly) agree to each individual country returning to 100 percent compliance, not compensating for declines in another OPEC member by boosting their production.
This position is in stark contrast with the reason that Saudi Arabia and Russia have been giving for a production boost—to offset production declines, most notably in collapsing Venezuela and a potential loss of supply from Iran when the new U.S. sanctions kick in later this year.