OPEC Chief Says Members Won't Make Output Decision in Algiers
September 18 2016 - 09:30PM
Dow Jones News
OPEC members damped expectations over the weekend for an
agreement to limit crude-oil output this month, as new pledges of
increased production from several countries threatened to render
any pact meaningless.
Mohammed Barkindo, the secretary-general of the Organization of
the Petroleum Exporting Countries said late Saturday that no
decision would be made at informal talks among the cartel's members
in Algeria next week.
"It is an informal meeting, it is not a decision-making
meeting," Mr. Barkindo told Algerian state media organization APS
on Saturday night.
OPEC members are still scheduled to have informal talks on Sept.
28, the last day of the International Energy Forum, a
petroleum-industry conference in Algiers. Mr. Barkindo said OPEC
would try to reach a consensus on Action in Algiers and then could
call an emergency meeting to make an actual decision if all members
agree.
The oil market has been buoyed by hopes that OPEC, the 14-nation
cartel that controls a third of the world's oil production, and
Russia, the world's biggest producer of crude, would agree in
Algeria to freeze output at current levels. Russian President
Vladimir Putin had lent his voice in support of the freeze, which
if enacted would be the first coordinated action to tackle a global
glut of oil that has sent crude prices to historic lows.
Hopes that OPEC would resume its traditional role of propping up
prices had sent slumping oil prices into a rally, entering
bull-market territory in August and breaching $50 a barrel. But
prices have fallen since as recent data show OPEC is actually
producing near-record amounts of crude. U.S. prices hit a one-month
low on Friday of $43.03.
The biggest problem facing OPEC advocates of a freeze are three
countries—Libya, Iran and Nigeria—which combined want to increase
their own output by about 1.5 million barrels a day this year.
Libya provided the most recent setback when top oil officials
said they planned to quickly increase oil exports after control of
several key ports changed hands in recent fighting. If the security
situation remains under control, Libyan officials said the oil
industry could produce up to one million barrels of oil a day, up
from 280,000 a day in August.
"Definitely we will not agree to a freeze without reaching our
quota from before," Libya's OPEC envoy Mohamed Oun told The Wall
Street Journal, referring to 1.6 million barrels a day, the amount
OPEC expected Libya to produce before the death and ouster of
dictator Moammar Gadhafi sent the country into political chaos.
OPEC members had played down Libya's potential for a resurgence,
saying the country's security situation remained volatile. Resumed
fighting over the ports last weekend underscored those challenges,
though ultimately a militia that has pledged to allow oil exports
to flow beat back an attack from a rival.
In Nigeria, sabotaged pipelines have sunk output to historically
low levels—1.5 million barrels a day in August, which is down
400,000 barrels a day from 2015. The country is expected to ship
250,000 barrels a day more in September after a cease fire with
Niger Delta militants was achieved. Ultimately, Nigeria wants to
return to its production to its stated capacity of more than two
million barrels a day.
Iran, where the country is still coming back from sanctions that
crippled its oil industry, has vowed to keep boosting its output
until it reaches more than four million barrels a day—still about
400,000 barrels a day more than current levels.
Iran's President Hassan Rouhani said on Saturday his country
would support any move to restore market stability but stopped
short of saying Tehran would join it.
The concerns about its own members' production highlight the
paralysis within OPEC. The cartel once saw its role as a price
supporter, able to swing the market up or down by regulating its
own production to match global demand. But an American oil boom
made OPEC's production less relevant to prices, and OPEC members
like Saudi Arabia are now instead competing fiercely to maintain
their share of the market by pumping full tilt.
Their hope was that a prolonged period of low prices would flush
out expensive-to-produce barrels in places like the U.S. and
Canada, eventually bring down supply naturally. But OPEC's recent
estimates show that American production has been more resilient
than it expected, and the cartel increased its expectations of
non-OPEC supplies this year and next.
John Hall, chairman of U.K. consultancy Alfa Energy, said a
freeze exempting Iran, Nigeria and Libya would be "pointless." It
would mean "others would have to cut production. Saudi would have
to lead such a cut. And they wouldn't do it because that would mean
giving back the market share they gained in the past two
years."
An OPEC official brushed off those concerns, saying the Algeria
talks were always seen as informal. The official said the Algiers
talks could lay the groundwork for an agreement at OPEC's next
official meeting on Nov. 30 in Vienna.
The Algiers meeting is aimed at "preparing the OPEC conference
on Nov. 30," the official said. "We are still aiming for a
freeze."
Hassan Morjea contributed to this article.
Write to Benoit Faucon at benoit.faucon@wsj.com and Summer Said
at summer.said@wsj.com
(END) Dow Jones Newswires
September 18, 2016 21:15 ET (01:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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