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Efforts to Clinch First Deal to Curb Output since 2008 in a New Push by OPEC


09/22/2016


Efforts to Clinch First Deal to Curb Output since 2008 in a New Push by OPEC
Algeria, which plays host to oil ministers next week, has always been the land of surprises as far as OPEC decision-making is concerned.
 
The market was shocked in 2004 and 2008 when unexpected announcements of production cuts to prop up prices were made at the last two meetings of the Organization of the Petroleum Exporting Countries (OPEC) held in Algeria in the same years.  
 
According to OPEC officials and sources, next week when its ministers return to Algiers and look ready to curb output for the first time in eight years, the stars could align for OPEC again.
 
Along with Russia which is involved in talks although not a member of OPEC, conciliatory signals that they want to work together are being sent by Saudi Arabia and Iran, arch-rivals in oil markets and in politics.
 
Details for an output-limiting deal that would impress the market but also allow oil ministers to claim victories at home in front of their respective domestic audiences are being tried to be worked out by OPEC experts behind the scenes.
 
"This time I think (things are) a little bit different because circumstances are a little bit better, helping (producers) to reach a deal," Iraq's OPEC governor Falah Alamri said on Thursday.
 
Since current oil prices at $45-50 per barrel were not acceptable to the group's members, OPEC had to act when it meets Russia on the sidelines of an energy producers and consumers conference in Algeria next week, he said.
 
In order to fight for market share with higher-cost producers such as the United States where production has been declining due to low oil prices, Iraq, Saudi Arabia, Iran and Russia have all ramped up output to historic highs over the past year.
 
While Russia and Iran have probably both hit peak capacity and Saudis have never tested higher production levels, given that Iraq wants to increase output further next year, it is seen as one of key stumbling blocks to a global oil production deal.
 
But Iraq would not kill the deal, Alamri said: "We are not intending to flood the market, we are intending to support the market.... we will not participate in any action that will reduce the price," he said.
 
OPEC last reduced supply in 2008 when the global economic crisis crippled demand.
 
After the Saudis said Iran needed to contribute to it as production recovered following the end to Western sanctions in January, the first attempt at an output freeze deal between OPEC and Russia collapsed earlier this year.
 
Before Tehran agrees to any action, its production needs to reach pre-sanction levels, Tehran has argued. And Tehran is still insisting on certain exemptions from any OPEC deals to curb supplies despite Iranian oil output getting stagnant in the past three months.
 
In order to try to figure out the shape of a possible output deal, Saudi Arabian and Iranian OPEC officials are meeting in Vienna this week.
 
"It seems that they all want to get some sort of consensus in Algiers. You can see that in the amount of meetings and diplomacy taking place. There is a real push," an OPEC source said.
 
(Source:www.reuters.com)