As disagreements about how to share the burden of supply cuts stood in the way of a deal to boost prices just days before a make-or-break meeting in Vienna, Saudi Arabia pulled out of planned talks with non-OPEC nations including Russia.
Before a ministerial meeting in Vienna two days later, OPEC officials were scheduled to meet with non-members including Russia on Monday. After the Saudis decided not to take part, the meeting was later canceled entirely.
Media quoted two delegates, asking not to be identified because the deliberations are sensitive, as saying in order to try to resolve its own differences, particularly the question of whether Iran and Iraq are willing to cut production, the group called another internal meeting. Before conversations with other producers such as Russia, Saudi Arabia wants an OPEC deal in place.
The fact that there is a split between Saudi Arabia and its two biggest Middle Eastern rivals at the Organization of Petroleum Exporting Countries is suggested by the setback. While it remains unclear if Iraq is still disputing the OPEC supply estimates that would provide the basis for any cuts, Iran insists it should be allowed to restore output to pre-sanctions levels. The refusal of just one major producer to participate could scuttle the whole of the agreement reached in September in Algiers with less than a week until the crucial ministerial meeting.
“The whole Algerian deal wasn’t clear from beginning and their approach was ‘leave it to later’,” said Abdulsamad al-Awadhi, a former OPEC official for Kuwait who is now an independent analyst in London. Two months after the initial accord “OPEC leaders are confused and the group’s founding members can’t solve differences, but they want to have a deal with non-OPEC. This is a tough call.”
The outline of its first production curbs since the global financial crisis in 2008 was agreed upon by OPEC in September. The cuts, which would bring its production to a range of 32.5 million to 33 million barrels per day, have been deliberated to be agreed upon for two months now since September. OPEC estimates that it pumped 33.6 million barrels a day last month.
To finalize the details of the cuts, technical experts from member countries met in Vienna this week. After two days of meetings the meetings were deferred to ministerial talks on Nov. 30 as the talks concluded without resolving the issue of Iran and Iraq.
If all members share the burden of cuts equitably and transparently, Saudi Arabia, OPEC’s de-facto leader, is ready to cut production. one OPEC delegate said last week that this translates to the meaning that Iran has to freeze production around current levels and Iraq needs to cut output.
Arguing that its fight against Islamic State justifies special treatment, Iraq had sought an exemption from joining any production cuts prior to the Nov. 23 comments by Prime Minister Haider Al-Abadi. A a Gulf OPEC delegate said that the significant issue of exactly how much the country would reduce production, and from what level, is left unresolved by that assertion.
(Adapted from Bloomberg)