An OPEC deal to curtail oil production appeared in jeopardy Tuesday as Iran said it won't make cuts while Saudi Arabia insisted Tehran must be willing to play a meaningful role in any agreement.
Ministers gathering in Vienna before today's crucial OPEC meeting are attempting to resolve differences obstructing an accord. Iranian Oil Minister Bijan Namdar Zanganeh laid out his country's position after talks with his Algerian and Venezuelan counterparts.
With little time left before the Organization of the Petroleum Exporting Countries meets to finalize the first production curbs in eight years, resistance from Iran -- and from neighboring Iraq -- has made the foundations for a deal look increasingly shaky. Top producer Saudi Arabia is ready to reject an accord unless all members -- Libya and Nigeria being exceptions -- participate, people with knowledge of the kingdom's position have said.
"I don't know" if there will be an agreement, Indonesian Energy Minister Ignasius Jonan told reporters in Vienna. "The feeling today is mixed."
An OPEC proposal initially agreed to in September would see producers trim output by about 1.2 million barrels a day from October levels. Iran has sought special treatment since it's ramping up output after years of crippling sanctions.
Iran has suggested it could freeze production at 3.975 million barrels a day, or about 200,000 barrels a day above current output, two OPEC delegates said Monday. Saudi Arabia countered with a proposal for Iran to cap output at 3.707 million. Algeria, acting as a go-between, offered an alternative that would see Iran freeze at 3.795 million, the delegates said.
Crude prices remain at half their level of mid-2014 as global supply continues to swamp demand. Brent crude fell $1.86, or 3.9 percent, to $46.38 a barrel on the London-based ICE Futures Europe exchange Tuesday. It was the lowest close since Nov. 14.
At negotiations in Vienna, countries have fought to the very last barrel.
While Iraq finally appeared to accept that OPEC supply estimates known as "secondary sources" should determine the basis for cuts, it was still insisting it should be allowed to freeze at October's output of 4.6 million barrels a day, according to one delegate. That's roughly the same level as would be reached if the proposal for a groupwide cut of 4 percent to 5 percent were applied to Iraq's own output estimate of 4.8 million barrels a day.
Algeria proposed that Iraq cut production by 240,000 barrels a day from the October secondary-sources level, two delegates said.
Saudi Arabia won't insist that Iraq and Iran make the same size reduction as other OPEC members and hasn't decided from which production level they'll be asked to cut, according to the people familiar with the situation.
Iraq had previously demanded an exemption from a supply deal, citing the urgency of its offensive against the Islamic State militant group.
"We support Iran in the sense that they've had sanctions and we have to take that into account in the deal that we make," Ecuador's minister for foreign affairs, Guillaume Long, told reporters in Vienna on Tuesday. "The same goes for Iraq as well. We know Iraq has a very expensive security situation that it faces, basically a war. We understand that requires special treatment."
Informal discussions between the heads of OPEC delegations will take place at about 8 a.m. Vienna time today, preceding the formal meeting at the Secretariat at 11 a.m., said two delegates, asking not to be identified because the information isn't public.
On Sunday, Saudi Oil Minister Khalid Al-Falih for the first time floated the possibility of leaving Vienna without an agreement. It was unclear whether the minister changed his mind about the deal's merits or was trying to improve his negotiating position with Iran and Iraq.
As OPEC tries to resolve its members' differences, the group is also asking other big producers including Russia to reduce output by as much as 600,000 barrels a day. The Kremlin so far has resisted requests that it join the cut, offering instead to freeze production at current levels.
Energy Minister Alexander Novak said Tuesday that he has no plans to visit Vienna today but that Russia is ready to talk if the OPEC members reach a consensus.
Information for this article was contributed by Laura Hurst, Golnar Motevalli, Grant Smith and Javier Blas of Bloomberg News.
Business on 11/30/2016