Thursday, March 10, 2016 3:53 pm
Iran is said to be the stumbling block for the meeting between oil producers to discuss a global pact on freezing production.
Iran, which just came out of UN imposed sanctions, is yet to say whether it would participate in such a deal.
OPEC officials including Nigeria’s oil minister have said a meeting would take place in Moscow on that date, potentially as the next step in widening an agreement to freeze output at January levels struck by OPEC members Saudi Arabia, Venezuela and Qatar plus non-member Russia last month.
But the biggest roadblock to a wider deal, OPEC delegates say, is Iran. Tehran feels it should be exempt from the agreement as it wants to recover market share it lost under Western sanctions. Kuwait said on Tuesday it will commit to the deal – if all major producers including Iran do so.
“They are not agreeing on the meeting. Why would the ministers meet again now? Iran says they will not do anything,” said an OPEC source from a major producer. “Only if Iran agrees, things will change.”
The pact on freezing output has helped support oil prices, which started a slide in mid-2014 due to oversupply. Brent crude was trading above $40 a barrel on Thursday, up 50 percent from a 12-year low of $27.10 reached in January.
Some delegates are wary that if many oil producers met too soon before getting the nod from everyone, prices could weaken again if the talks ended in disarray.
“Our view is not to go there with the possibility of no agreement so as not to affect prices negatively,” said another source from a major OPEC member, referring to the proposed March 20 meeting.
OPEC’s Gulf members favour meeting in the first half of April, in Doha or another Gulf city, a Gulf delegate said last week.
Another OPEC delegate was more pessimistic, saying he expected no major progress until OPEC’s next scheduled meeting in June.
Tehran has rejected freezing its output at January levels, put by OPEC secondary sources at 2.93 million barrels per day (bpd), and wants to return to much higher pre-sanctions production.
“Tehran wanted a freeze … for them to be based on 4 million barrels per day, their pre-sanctions production figure,” said one source familiar with the discussions. A source familiar with Iranian thinking agreed.
The issue is set to be discussed this month when Russian Energy Minister Alexander Novak meets Iranian counterpart Bijan Zanganeh.
Some OPEC sources hinted that there could be a workable agreement on the table to get Tehran on board.
“If they are willing to find a solution, they should offer a fair deal to Iran,” one said.
There are precedents for OPEC members to be exempt from agreements on output restraint. Iraq, for example, was not included for many years due to sanctions and war.
Indication that the meeting may not even achieve its output freeze goal was given earlier today by Kazakhstan.
Kazakhstan said it has no plan to freeze oil output and would instead ramp up production to its original target of 77 million tonnes per year if the oil price stayed above $40 a barrel.
Energy Minister Vladimir Shkolnik also signalled that the biggest ex-Soviet oil producer after Russia had not been invited to take part in a planned meeting of OPEC and non-OPEC oil producers to discuss freezing output.
“If we are invited, we will (take part in the meeting),” Shkolnik told reporters. Kazakhstan is not a member of the Organization of the Petroleum Exporting Countries.
The Kazakh government in its budget in November had targeted oil output of 77 million tonnes in 2016, assuming an average oil price of $40 a barrel, but it lowered the target to 74 million tonnes last month as Brent crude hovered nearer $30.
“If the average price is about $40, the output will be 77 million tonnes,” Shkolnik said.
That would still be lower than production last year of 79.5 million tonnes.