Bloomberg| Angelina Rascouet and Grant Smith: OPEC’s final push to implement the Algiers supply accord and boost oil prices shifted focus to Iran and non-members such as Russia as Iraq appeared to reverse its opposition to output cuts.
The extension of shuttle diplomacy — including a visit to Tehran from an architect of the September agreement and an unusual Vienna breakfast with non-OPEC ministers — comes after an OPEC committee failed this week to hammer out details of how producers will share the burden of cuts. With less than a week until the crucial Vienna ministerial meeting, the refusal of just one major producer to participate could scuttle the whole deal.
Even if Iraq, second only to Saudi Arabia in the Organization of Petroleum Exporting Countries, is on board, other obstacles remain. Iran, the group’s third-largest producer, is insisting it should be allowed to keep increasing output to pre-sanctions levels of about 4 million barrels a day. Russia’s offer to freeze production at record levels — if OPEC does a deal — isn’t good enough for some members who are asking for a cut.
“The change of direction in the positioning of Iraq increases the likelihood of an OPEC agreement,” said Olivier Jakob, managing director of Zug, Switzerland-based consultant Petromatrix GmbH. “The sound bites of different oil ministers have not been enough to build confidence in OPEC and the market has turned into full wait-and-see mode.”
Algeria’s Energy Minister Noureddine Boutarfa will travel to Tehran on Saturday to meet his Iranian counterpart in an effort to bring a deal closer. On Monday, he will meet with Iraq’s Oil Minister Jabbar Al-Luaibi in Vienna. Algeria is the ninth-largest producer in OPEC and has limited international clout, but in September played a central role in clinching the preliminary agreement on output cuts that had eluded its more formidable counterparts throughout the two-year oil slump.
Iraq is now less of a problem after positive statements from Baghdad and Iran is now the focus of diplomatic efforts, said a person familiar with the matter.
Oil prices rose Wednesday as Iraqi Prime Minister Haider Al-Abadi said his country would shoulder part of the burden of output cuts. That assertion still leaves unresolved the significant issue of exactly how much the country would reduce, and from what level, said a Gulf OPEC delegate. Iraq has been disputing the OPEC supply estimates that would form the basis of cuts, saying they underestimate its production.
OPEC has asked non-members to cut production by 500,000 barrels a day, Russian Energy Minister Alexander Novak told reporters in Moscow Thursday. The need for a reduction of that size was reiterated by OPEC’s Economic Commission Board, a panel of officials that makes recommendations for the ministerial meeting, according to an OPEC delegate.
The role of Russia is going be critical in shaping a deal, said Emmanuel Kachikwu, Nigeria’s minister of state for petroleum, but Novak still insists the nation is only willing to freeze at current record levels.
In a final effort to secure cooperation from non-members — essential if supply cuts are to make a serious dent in the oil surplus next year — OPEC will take the unusual step of holding a breakfast meeting in Vienna with ministers from countries including Russia, just moments before the group’s own top officials gather to hammer out the final terms of what could be the first production cuts in eight years, according to two people familiar with the matter.