LAUNCESTON: There are two ways of looking at the OPEC meeting in Vienna, and neither is wrong. Firstly it was a success as the Saudis and Iranians managed to be relatively nice to each other, and secondly it was a failure because everybody can still pump as much oil as they feel like.
The market expectations had been set so low for the Organization of the Petroleum Exporting Countries meeting yesterday in the Austrian capital that the positive view appears to be more common in the post-conference assessments.
The April gathering in Doha, which included non-OPEC major Russia, was widely viewed as a debacle because the market had expected a production freeze to be agreed and instead they got an acrimonious breakdown between Gulf rivals Saudi Arabia and Iran.
While Thursday's OPEC meeting also failed to agree any production limits, or indeed a clear-cut strategy for the group, there were some encouraging signs.
The first was that new Saudi Energy Minister Khalid al-Falih struck a conciliatory note and tried to reassure the market that his country, the world's largest crude exporter, would act responsibly.
"We will be very gentle in our approach and make sure we don't shock the market in any way," Falih told reporters.
In other words, the Saudis are going to carry on with their current policy of producing as much as they can sell and allowing the market to set the price of oil.
For its part, Iran was also more conciliatory but equally insistent that it will continue to ramp up output until it gets back to what it considers its rightful market share.
Bijan Zanganeh, Iran's oil minister, said his country doesn't support an output ceiling and that its output quota should be based on historic levels of about 14.5 percent of OPEC's total production.
This would give Tehran a quota of about 4.7 million barrels per day (bpd), which is well above the market's estimate of current Iranian output of about 3.5 million bpd.
PRODUCER RIVALRY TO CONTINUE IN ASIA
The main takeaway from Thursday's event is that nothing has really changed since the December OPEC meeting, which effectively imposed no restrictions on members at all.
It was hardly surprising that Brent crude dropped to the lowest in 13 years in the wake of that meeting, slumping to $27.10 a barrel on Jan. 20.
Since then a combination of lower output from high-cost wells, such as some US shale producers, and outages caused by wildfires in Canada and unrest in countries including Libya and Nigeria has led Brent to rebound to close at $50.04 a barrel on Thursday.
The Saudi tactic of letting low prices force supply from the market has started to work, but oil's recent gains probably owe more to the output disruptions.
There are some positive signs on demand as well, with both of Asia's top importers, China and India, posting strong demand growth. China's crude oil imports are up 11.8 percent in the first four months of the year to about 7.46 million bpd, while India's April imports jumped 15.6 percent from the same month a year earlier, bringing the total for the first four months of the year to about 4.31 million bpd.
China's imports are still being driven by purchases for strategic storage, a process that has some way to run, while India's story is more one of strong economic growth increasing vehicle sales and fuel consumption.
China and India are the battleground for Saudi Arabia, Iran and Russia and the OPEC meeting did nothing to suggest that the fight for market share is abating.
Russia has overtaken Saudi Arabia to be China's top supplier so far this year, while Iran has been gaining market share in Asia, with shipments to the region likely to have jumped 60 percent in May from the same month a year earlier.
Overall, the OPEC meeting in Vienna did very little to alter the dynamics of the crude oil market.
If it did achieve anything, it was that everybody seemed to make an effort to get along, which could be important if it lays the groundwork for deeper cooperation at the next meeting in December.
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