23 November 2016, Lagos – The Organisation of Petroleum Exporting Countries (OPEC) is on course to finalise the details of the Algiers accord to cut oil production at a meeting in Vienna on said a delegate from Nigeria.
“There is certainty that everybody is on board. Everyone knows that the stakes are high,”Ibrahim Waya told reporters on his way into a meeting at the secretariat of OPEC.
Oil traders and analysts have grown more confident this week that OPEC will reach a deal to curb global oversupply. After a first day of talks in the Austrian capital on Monday — a warm-up for a ministerial meeting next week — Libyan OPEC Governor Mohamed Oun said the discussions went well. Oil has risen 6.9 per cent in New York this week, the biggest two-day gain since September.
OPEC proposed in September limiting output to a collective 32.5 million to 33 million barrels a day, which would be its first cut in eight years. The group’s own estimates show production at 33.6 million barrels a day last month.
The main hurdles to finalising the Algiers accord have been demands from some members for exemptions from cuts. Iran has sought special treatment since it is newly free of international sanctions, while Iraq has contested OPEC’s production estimates that would form the basis for the accord. This week’s meeting in Vienna, alongside intensive diplomacy among member states, is aimed at resolving those differences.
“The rise in prices since the end of last week can be explained by the growing expectation that OPEC will agree on production cuts at its meeting next week,” Commerzbank AG said in a note. “It looks as if Saudi Arabia and its allied Gulf neighbors will reduce production on their own, though only on condition that the other OPEC states do not step up their output.”
West Texas Intermediate crude rose as much as two per cent to $49.20 a barrel.
“The Algerian plan is the only plan that has been on the cards,” Waya said. It would be a six-month agreement to take effect in January, he added.
The original proposal discussed in the Algerian capital was for every member, with the exception of Libya, Nigeria and Iran, to reduce their output by 1.6 percent from the average January-to-August level, according to a document seen by Bloomberg. That would take group production to 32.4 million barrels a day, with Saudi Arabia cutting by 442,000 barrels a day and Iraq trimming 135,000 compared with August levels.
OPEC has spent the almost two months since the Algiers meeting trying to work out how to share out supply curbs. Iraq has since sought an exemption from making cuts, arguing that its fight against Islamic State justifies special treatment. Iraq will make “new proposals” to help reach an agreement, Oil Minister Jabbar al-Luaibi said in an e-mailed statement Nov. 21.
Non-OPEC nations including Russia, the world’s largest energy exporter, will meet with OPEC members in Vienna on Nov. 28 to discuss cooperation on oil-supply curbs. Energy Minister Alexander Novak has repeatedly said Russia would prefer to freeze output at current record levels than make cuts.
“You had President Putin clearly speaking yesterday about this agreement to freeze,” Waya said. “He calls it freeze which is the language that everybody will be interested in.”