Tuesday, November 29, 2016 10:01 pm
OPEC agreement to cut production in limbo
GEORGE JAHN and KIYOKO METZLER | Associated Press
VIENNA – Up to this week, chances that OPEC countries would agree to their first cut in output in eight years were looking good. Now, not so much.
Saud Arabia is questioning an informal agreement made in September to trim production. And the desert kingdom, which accounts for about a third of OPEC’s output, normally prevails at ministerial meetings.
Whether OPEC decides to cut or not at their meeting today will influence energy prices around the world as the cartel remains the dominant force in oil markets. The price of crude fell about 4 percent Tuesday as it appeared uncertain that a cut might be agreed upon.
Still, a deal is not out of the question, and even a remote possibility that it will be backed is an exciting prospect.
Spencer Welch, an analyst with IHS energy, casts the event as "potentially the most important OPEC meeting since 1973," when the cartel imposed a highly effective oil embargo on the West.
Those days of OPEC unity have been replaced by infighting and rivalries that have tarnished the cartel’s image and crippled its ability to set world prices and supplies.
Instead of cutbacks, Saudi oil minister Khalid Al-Falih says the Organization of the Petroleum Exporting Countries should do no more than what it has done for nearly a decade – sit back and let demand drive up prices "without an intervention from OPEC."
The Saudi stance raises chances not only of yet another inconclusive meeting. It also refocuses the spotlight on the battle for influence between the Saudis and Iran.
Once second only to Saudi Arabia in production within OPEC, Iran chafed for years under sanctions that crimped its oil sales while watching its rival increase its output. With sanctions lifted this year as a result of a nuclear agreement, Iran is looking to regain its market share within OPEC while pushing the Saudis to give up gains it says were made while Tehran was sanctioned.
Al-Falih may be hoping that his apparent about-turn on output cuts will pressure Iran and other members to be more open to reducing their own production instead of waiting for the Saudis to go it alone. And at least one important member appears to be listening.
Iraqi Prime Minister Haider al-Abadi told The Associated Press that his country is ready to pare back output as part of an overall OPEC decrease of 900,000 to 1.2 million barrels per day. That would be cut of between 2.7 percent and 3.6 percent from October levels.