OPEC stood on the verge of a deal to reduce its official output target in line with recent production, but after six hours of fraught talks in Vienna on Thursday, ministers left the cartel’s headquarters before a final agreement was nailed down.
Saudi Prince Abdulaziz bin Salman, in his first meeting as minister of energy, left reporters with a promise that “beautiful news” was to be revealed yesterday.
His comments were the culmination of a long day that yielded little of substance for oil traders wondering if OPEC and its allies would take action to prevent a crude surplus coming back next year.
Earlier in the day, ministers reached a deal in principle to deepen their output-cuts target by 500,000 barrels a day, delegates said.
A reduction of that magnitude would be largely symbolic, simply formalizing the extra supply reductions the group has already been making for most of this year, rather than taking barrels off the market.
Saudi Arabia’s new production target was likely to be above 10.1 million barrels a day, according to one delegate, slightly higher than recent levels.
Even so, the cartel could not finalize the details of how to divide the adjustment between members before further discussions with partners from the wider OPEC+ group yesterday, delegates said.
The new output target for Iraq, which has the worst record of implementing the existing cuts of any major oil producer in OPEC, was a particular sticking point, delegates said.
“The ruckus reflects pushback by producers facing stronger pressure than in the past to comply and contribute real, voluntary cuts,” said Bob McNally, president of Rapidan Energy Group and a former oil official at the White House under then-US president George W. Bush. “Nobody said collective supply management was easy or fun, especially after four years of struggle against surpluses.”
Brent crude traded little changed at US$63.30 a barrel as of 7:47am in London yesterday after climbing 0.6 percent on Thursday. West Texas Intermediate futures for next month were also little changed, trading at US$58.36 in New York.
In any event, OPEC’s policy decision was not due to be officially ratified until yesterday, when the OPEC+ meeting was scheduled.
However, unresolved questions around Iraq’s contribution posed a bigger obstacle to a deal than usual.
Crucially, the new 500,000 barrel-a-day quota reduction, which would apply in the first quarter of next year, would only come into force if all members of OPEC+ implement 100 percent of their pledged curbs, Russian Minister of Energy Alexander Novak said in a Bloomberg TV interview.
That is something that the alliance has struggled to achieve throughout the three years of its existence, with some countries such as Iraq actually increasing output after promising to cut.
OPEC+ last year agreed to reduce volumes by about 1.2 million barrels a day to eliminate a surplus and bolster crude prices. In reality, the alliance has cut far deeper for most of this year due to a combination of voluntary and involuntary measures.
The group’s Joint Technical Committee said that supply reductions exceeded that target by about 40 percent in October, equivalent to about 500,000 barrels a day of additional curbs.
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