OPEC ministers and representatives from Russia will meet in Doha today for another round of talks without ministers from Iran and Iraq, the two countries that pose the biggest obstacle to a deal to cut oil production.
OPEC members are "all hands on deck" to reach an agreement by the group's Nov. 30 meeting in Vienna, Secretary-General Mohammed Barkindo said in Marrakech, Morocco. Saudi Arabia, Iraq and Iran remain at odds over how to share output cuts, said an OPEC delegate, who asked not to be identified because the information isn't public.
The latest round of diplomacy reflects OPEC's struggle to finalize the deal reached in Algiers on Sept. 28, which would end a two-year policy of pumping without limits. More than 18 hours of talks last month in Vienna failed to overcome internal disagreements, which in turn prevented a wider pact with non-OPEC producers. Without an accord, the International Energy Agency predicted a fourth-consecutive year of oversupply in 2017.
Brent crude rallied to a one-year high after the announcement of OPEC's preliminary accord to reduce production, but has since fallen back as doubts over the deal grow.
"Freeze diplomacy continues in full swing," Olivier Jakob, managing director of the consulting firm Petromatrix of Zug, Switzerland, said in a note Wednesday. "We think that Saudi Arabia wants to make sure that everything is done before the November 30th meeting."
Russia will hold informal consultations with OPEC representatives, potentially including Saudi Minister of Energy and Industry Khalid Al-Falih, at the Gas Exporting Countries Forum in Doha today and Friday, Energy Minister Alexander Novak said in Moscow. There's a high chance of an agreement by the Nov. 30 meeting and Russia is ready to support a decision, he said.
Neither Iran, Iraq nor Nigeria will send oil ministers to Doha.
Iraq has sought an exemption from joining any production cuts, arguing that its fight against Islamic State militants 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.
The talks in the Qatari capital run alongside behind-the-scenes diplomacy, including an unannounced meeting in recent days in London between Barkindo and Al-Falih. After traveling to Venezuela to meet with President Nicolas Maduro, OPEC's top official also will visit Ecuador and Iran, two people familiar with the matter said Tuesday.
OPEC pledged in Algiers to take its production down to a range of 32.5 million to 33 million barrels a day, which compares with the group's own output estimate of 33.6 million last month. It's also seeking cooperation from Russia and other nonmembers, although so far none has committed to curbing output.
Saudi Arabia, essentially OPEC's leader, is ready to cut production, but only if the effort is built around four pillars, said one 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 figures, 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.
Three countries -- Libya, Nigeria and Iran -- have been granted "special considerations" to implement the Algiers accord, Barkindo said. Iraq is not among these members, he said.
In Libya and Nigeria, production is still recovering after violence and militant attacks targeting oil infrastructure. Saudi Arabia, Iraq and Iran are the largest producers within OPEC, accounting for about 55 percent of the group's output, according to data compiled by Bloomberg.
Information for this article was contributed by Grant Smith, Angelina Rascouet, Javier Blas and Golnar Motevalli of Bloomberg News.
Business on 11/17/2016