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Opec said to defer question of Iran, Iraq cuts for ministers
[LONDON] Opec talks in Vienna Tuesday didn't resolve whether Iraq and Iran will join any production cuts, instead deferring the crucial matter to ministers who will meet on Nov 30, said two delegates.
While Libya's Opec governor Mohamed Oun said the meeting ended with a consensus that will be presented to ministers, he declined to comment on whether the group's second and third largest members are willing to limit output.
The continuing questions around Iranian and Iraqi production don't make a deal impossible next week, the delegates said, asking not to be named because the talks are private. However, the lack of agreement Tuesday leaves open the possibility the group fails to implement the cuts first outlined in late September.
Officials leaving the Organization of Petroleum Exporting Countries headquarters in Vienna told reporters they have agreed on most details and that they were happy with the outcome of Tuesday's talks. But on top of the pending Iran and Iraq issue, securing cooperation from non-members including Russia has emerged as a mounting concern among some Opec countries, said one delegate.
Saudi Arabia and its allies in the 14-nation group want Russia to cut output rather than freeze it, the delegate said.
"Just as the market has become optimistic about the prospects for an Opec deal, challenges have emerged," Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd in London, said in a note to clients. "Iran and Iraq are now revisiting their demands for exemptions, seeking to pressure Saudi Arabia to do all the work."
Opec reached a preliminary agreement in Algiers on Sept 28 to reduce collective output to 32.5 million to 33 million barrels a day, compared with the group's estimate of 33.6 million in October. Technical experts from member countries met in Vienna this week in an attempt to figure out how to share the cuts.
While the talks focused on reaching the lower end of that production range, some members continued to resist Iran and Iraq's argument that they should be exempt from reducing output, said one delegate.
If there's no agreement to restrict output, the International Energy Agency has said that oil prices are likely to fall in 2017. Opec's own estimates of supply and demand also show that the Algiers agreement would barely drain a record oil surplus next year without the cooperation of non-members such as Russia, the world's largest energy exporter. West Texas Intermediate crude, the US benchmark, fell 1.8 per cent to US$47.33 a barrel at 12:47pm on the New York Mercantile Exchange.
Deferring the question of Iran and Iraq's participation to the ministerial meeting would mean the group won't have a finalised agreement to present to Russia and other non-members at a meeting scheduled for Nov 28 in Vienna. Moscow has insisted Opec should reach an internal deal before seeking the backing of other producers. President Vladimir Putin has also repeatedly said he would prefer to freeze output at current record levels to making cuts.
In public, Opec delegates characterized this week's meeting as making progress. "There is certainty that everybody is on board," Nigerian Opec delegate Ibrahim Waya told reporters on his way into the meeting on Tuesday.
"Everyone knows that the stakes are high."