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Ahead of OPEC Meeting, Iran, Iraq at Loggerheads with Saudis


11/29/2016


Ahead of OPEC Meeting, Iran, Iraq at Loggerheads with Saudis
It has become difficult for the Organization of the Petroleum Exporting Countries to reach a global output-limiting deal when it meets on Wednesday as Iran and Iraq are resisting pressure from Saudi Arabia to curtail oil production.
 
Efforts to bridge differences between OPEC's de facto leader, Saudi Arabia, and the group's second- and third-largest producers over the mechanics of output cuts failed at a meeting of experts in Vienna on Monday, reported Reuters quoting OPEC sources.
 
"The revival of Iran’s lost share in the oil market is the national will and demand of Iranian people," Iranian news agency Shana quoted the country's oil minister Bijan Zanganeh, who was due to arrive in Vienna later on Tuesday, as saying.
 
Compared to the current oil output of 33.64 million bpd to prop up oil prices, which have halved since mid-2014, OPEC, which accounts for a third of global oil production, agreed in September to cap output at around 32.5-33.0 million barrels per day.
 
To regain market share lost under Western sanctions Iran has argued it wants to raise production and it states that it was during that period that its political arch-rival Saudi Arabia increased output.
 
Riyadh suggested Iran limit production at below 4 million bpd in recent weeks, and it itself offered to cut its own output by 0.5 million bpd, according to OPEC sources. Tehran has sent mixed signals including that it wanted to produce 4.2 million bpd.
 
Claiming that it needs more money to fight the militant group Islamic State, Iraq has also been pressing for higher output limits.
 
Whether Baghdad should use its own output estimates to limit production or rely on lower figures from OPEC's experts is the focus of the argument between Iraq and Saudi Arabia.
 
Ail markets would rebalance even without an output-limiting pact, said Saudi Energy Minister Khalid al-Falih said at the weekend even as tensions within OPEC mounted. He had previously said Riyadh was keen for a deal.
 
Little time is left for traditional pre-meeting discussions with other ministers as Falih was not expected to land in Vienna before Tuesday evening.
 
"The feeling today is mixed," Indonesian Energy Minister Ignasius Jonan told reporters on Tuesday when asked about the prospects of a deal. "I don't know. Let's see."
 
Brent crude LCOc1 was down more than 2 percent, near $47 a barrel, after the Indonesian comments.
 
Oil prices will correct sharply if OPEC fails to reach a deal, potentially going as low as $35 per barrel, some analysts including Morgan Stanley and Macquarie have said.
 
The market was likely to move into a deficit in the second half of 2017, said Goldman Sachs, one of the most active banks in oil trading, adding that it saw prices averaging $45 a barrel until mid-2017 even without any OPEC deal.
 
A global glut would push oil prices to around $20, Goldman was saying a year ago. In January 2016, prices fell to multi-year lows of $27 per barrel.
 
Saudi Arabia has also signaled it was unhappy with Russia's position besides disagreements with Iran and Iraq.
 
(Source:www.reuters.com) 


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