Iran appeared on Friday to be the main obstacle for an OPEC deal to cut oil production as the group’s leader Saudi Arabia had yet to agree exemptions for sanctions-hit Tehran, two OPEC sources said.
The Organization of the Petroleum Exporting Countries resumed discussions in Vienna at around 0900 GMT, before a meeting later in the day with non-OPEC oil producers led by Russia.On Thursday, OPEC tentatively agreed an oil output cut but could not decide concrete parameters for reductions as it was waiting for a commitment from non-OPEC heavyweight Russia, sources from the group said.
On Friday, two OPEC sources said Saudi Arabia’s arch-rival Iran, which came under fresh U.S. sanctions in November, was also holding up a final deal.
“Iran will insist on an exception until sanctions are removed,” one of the OPEC sources said.Saudi Arabia has come under pressure from U.S. President Donald Trump to help the global economy by refraining from cutting supplies.And with Trump seeking to squeeze Tehran with sanctions, an OPEC output cut would provide additional support to Iran by increasing the price of oil.
Possibly further complicating any OPEC decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October. Trump has backed Saudi Crown Prince Mohammed bin Salman despite calls from many U.S. politicians to impose stiff sanctions on Riyadh.U.S. special representative for Iran Brian Hook met Saudi Energy Minister Khalid al-Falih in Vienna this week, in an unprecedented development ahead of an OPEC meeting. Saudi Arabia first denied the Hook-Falih talks took place.
“U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the market,” said Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher.The price of crude LCOc1 has fallen almost a third since October to below $60 a barrel as Saudi Arabia, Russia and the United Arab Emirates raised output to offset lower exports from Iran, OPEC’s third-largest producer. [O/R]
The price decline prompted OPEC and its allies to discuss output cuts, and Falih said on Thursday possible reductions by those involved ranged from 0.5-1.5 million bpd.“The Iran exemption is the biggest hurdle … If there is no agreement, the timeline for a deal will be pushed to the first quarter of 2019,” Energy Aspects said in a note.A reduction of 1 million bpd would be acceptable and so far was the main scenario, Falih said, but he added that Russia needed to commit significant volumes.
Russian Energy Minister Alexander Novak met with President Vladimir Putin in St Petersburg on Thursday and was flying back to the Austrian capital on Friday morning.OPEC delegates have said the group and its allies could cut by 1 million bpd if Russia contributed 150,000 bpd of that reduction. If Russia contributed around 250,000 bpd, the overall cut could exceed 1.3 million bpd.Novak said on Thursday that Russia would find it harder to cut oil output in winter than other producers because of the cold weather.
Russia, Saudi Arabia and the United States have been vying for the position of top crude producer in recent years. The United States is not part of any output-limiting initiative due to its anti-trust legislation and fragmented oil industry.On Thursday, U.S. government figures showed the country had become a net exporter of crude oil and refined products for the first time on record, underscoring how the surge in production has altered the supply equation in world markets.
Sources and photo-credits: Reuters