Output deal unlikely in Algiers
There will be no formal deal at the gathering of Opec and non-Opec producers in Algeria, a Mideast Gulf official close to Saudi Arabia tells Argus. The meeting, to be held on the sidelines of the International Energy Forum (IEF) on 26-28 September, will be informal, so will not result in any formal decisions, he says.
"Saudi Arabia's goal is to create consensus amongst oil producers to reach a credible agreement that will help stabilise the market," the official says. Riyadh wants the Algiers meeting to build a consensus over production that can be drafted into a formal agreement at the next Opec meeting in November.
Opec secretary-general Mohammed Barkindo has similarly poured cold water on the prospect of collective action in Algiers. "It is not a decision-making meeting," Barkindo says. But if there is a consensus over oil production controls in Algiers, Barkindo says he could call an extraordinary Opec meeting to formalise a decision. "It is proposed that this informal meeting leads to an extraordinary meeting in order to make a decision," he says.
Iraq says market conditions have changed sufficiently for producers to be able to agree to freeze output at the meeting. "If we go back to April, the Doha meeting, the participating countries did not reach an agreement because at that time, the circumstances were not enough to strike a deal," says the head of Iraqi state-owned oil marketer Somo, Falah al-Amri, who is also the country's Opec governor. "At that time, Opec and non-Opec countries were fighting for market share, and all were trying to reach their peak."
The Doha meeting ended in failure when Saudi Arabia insisted that Iran participate in the freeze. Iranian oil minister Bijan Namdar Zanganeh said in April, and continues to assert today, that Iran will consider joining a deal only after the country raises its crude production to a pre-sanctions level of 4mn b/d. Iran says it produced 3.63mn b/d in August.
Al-Amri suggests that Iran could be ready to co-operate, given that its production is "nearly there" and because it has secured a significantly greater share of the global market since April. "This is the right time," he says. "We have to do something, because they are not happy with the price. The price is not acceptable. All producers, consumers and international companies are hurting from this price." Opec's basket price has fallen to \\$38/bl this year, down from \\$49/bl in 2015.
But Iraq's new oil minister Jabbar al-Luaibi says Baghdad will aim to maintain output of 4.75mn-5mn b/d, which is higher than production has been this year. Argus put Iraqi output at 4.32mn b/d in August — little changed since the Doha meeting earlier this year. Iran and Saudi Arabia added 200,000 b/d and 420,000 b/d to their output, respectively, over the same period.
Output revival
Production is expected to rebound in Libya and Nigeria as disrupted supplies come back on stream. Nigerian output is expected to reach around 1.9mn b/d in October, up from an 18-year low of 1.6mn b/d in August. Libyan production is 350,000 b/d and could rise further as long shut-in fields come back on stream.
Opec is producing 1mn b/d more than the market needs for the second half of this year and 800,000 b/d more than it needs in 2017, the organisation's latest Monthly Oil Market Report says.
Venezuelan energy minister Eulogio Del Pino says global crude production of 94mn b/d must be cut to 85mn b/d to sustain a "fair equilibrium price".
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