Vienna – Doubts grew Monday that OPEC members can overcome their rivalries in the name of higher oil prices in Vienna this week and nail down the cartel’s first output cut in eight years.
Failure to get an accord on Wednesday could send oil prices tumbling and deal a further blow to the credibility of the 56-year-old Organization of the Petroleum Exporting Countries.
Not getting a deal “could be the end of OPEC”, energy analyst Alexandre Andlauer told AFP. Fading hopes for an agreement sent oil prices lower on Friday. On Monday they were little changed.
Saudi Arabia’s energy minister on Sunday added to the pessimism by suggesting that recovering demand would help “stabilize” prices next year, even without OPEC intervention.
“We don’t have a single path which is to cut production at the OPEC meeting, we can also depend on recovery in consumption, especially from the US,” Saudi media quoted Khaled al-Falih as saying.
Investors are concerned that the meeting may be a “waste of time”, said Mike van Dulken, Head of Research at Accendo Markets.
In September the cartel agreed in principle to lower production to 32.5-33.0 million barrels per day (bpd), meaning a cut of between 600,000 and 1.1 million bpd from current levels.
This, OPEC’s 14 members hope, will reduce the mammoth global supply glut and so increase the market price of oil from its current painful level of below $50 a barrel.
It also marks a reversal of OPEC kingpin Saudi Arabia’s two-year-old strategy of flooding the market to squeeze out rivals, in particular US shale oil producers.
– Devil in the detail –
But it remains to be agreed what size cuts, if any, each of OPEC’s members will make, particularly Iraq and Iran, the cartel’s next-biggest producers. Libya and Nigeria want to be exempted.
Iraq has said it will cut output but that it is short of money needed to fight Islamic State extremists. It also disputes with OPEC the level of its current output.
Iran, free to export oil since last year’s nuclear deal, won’t cut production until it has reached pre-sanctions levels.
The Financial Times reported Monday that Saudi Arabia has offered to cut its production by 4.5 percent from 10.5 million bpd — provided Iran freezes output at around 3.8 million bpd.
Adding to the difficulties is the fierce rivalry between Shia Iran and Sunni Saudi Arabia, engaged in a proxy war in Yemen and backing different sides in Syria.
– Russia on board? –
Since OPEC only accounts for a third of global output it wants non-cartel countries, in particular Russia, to cut production too, reportedly by some 600,000 bpd.
President Vladimir Putin has said that Russia, which is pumping a post-Soviet record of 11 million bpd and which has been hit hard by low ol prices, is ready to “freeze” output but not to cut.
In a sign of ongoing tensions, Saudi Arabia pulled out of talks due Monday with non-OPEC producers including Russia, Azerbaijan and Kazakhstan. Instead OPEC members held technical talks among themselves.