With crude oil falling from the year high of $54 per barrel following tentative agreement to cut supply, the Organisation of Petroleum Exporting Countries (OPEC) is in a final push to resolve differences hampering the move.
Oil is currently trading at $45 per barrel as uncertainties continue to trail the group’s resolve to implement the Algiers deal which saw Nigeria and Libyia exempted from production cuts due to supply challenges in their countries.
Vandalism by militant groups in the Niger Delta has limited Nigeria’s export to less than two million barrels daily in the past one year. Efforts by the Federal Government which included a meeting between leaders and youths from the region and President Muhammadu Buhari last week has also failed to end attacks on oil and gas facilities.
But with the OPEC ministers’ meeting in Vienna, Austra, just two weeks away, the cartel has embarked on a final diplomatic effort to secure a deal on oil cuts, with Qatar, Algeria and Venezuela leading the push to overcome the divide between the group’s biggest producers, according to a delegate familiar with the talks.
According to Bloomberg, behind-the-scenes diplomacy comes after bilateral meetings over the weekend failed to resolve the rifts. Saudi Arabia, Iraq and Iran are still at odds over how to share output cuts, the person said.
Saudi Arabia, the group’s de-facto leader, is ready to cut production, but only if the effort is built around four pillars, said the delegate. All members must agree to collective action, pledge to share the burden of cuts equitably, and do so in a way that is transparent and has credibility with the market. The latter can be achieved by using OPEC estimates of how much each member pumps, rather than relying on the countries’ own estimates, the delegate said.
In practice, that means Saudi Arabia still thinks Iraq needs to cut output and Iran has to freeze production around current levels, the person said. Neither country has so far agreed to do that. As initially outlined in Algiers, Libya and Nigeria would be exempt from supply curbs.
Iran is considering a proposal to freeze its oil production near the level the country says it pumps (nearly 4 million barrels a day) rather than OPEC’s estimate of about 3.7 million, the delegate said. Iraq is mulling a cut, but only from the Oil Ministry’s own level of about 4.8 million barrels a day, not the 4.6 million barrels a day OPEC says it pumps, the person said.
Iraq has sought an exemption from joining any production cuts, arguing that its fight against Islamic State justifies special treatment. Iran has insisted it won’t accept any limits on its production until it has returned to the pre-sanctions level of about 4 million barrels a day.
“People are pretty pessimistic right now about a potential agreement,” BP Plc Chief Executive Officer Bob Dudley said in a Bloomberg Television interview from Riyadh. “You see that in the price,” he said. If the talks fail, prices “will stay around the level we’re at.”
As OPEC nations work to secure a deal, Algerian Prime Minister Abdelmalek Sellal led a delegation which includes the Energy Minister Noureddine Boutarfa for a two-day visit to Saudi Arabia starting Monday, state-run Algerian Press Service reported. Boutarfa plans to travel from there to Qatar, where several other OPEC ministers are scheduled to attend a gas forum on Nov. 17.
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