Oil soars as Saudi Arabia and Iran point to OPEC deal

November 30th, 2016

Awake Goy

In return, the kingdom has asked Iran to curb output at close to 3.7m b/d, although privately it has indicated it may allow a higher level near 3.8m b/d, which is close to its current rate of production, according to third-party assessments used by Opec.

Iran, which is finding its feet after years of western sanctions, initially said it should be exempt like conflict-ridden Nigeria and Libya. Later, however, it softened its stance, saying it would freeze its production closer to 4m b/d. Mr Zanganeh on Wednesday said Iran believed Opec should use so-called secondary sources as the basis of any agreement, a previous point of conflict.

Mr Falih told reporters that, based on Opec estimates, Iranian supply had recovered to pre-sanction levels and a freeze at this level would be well received by other members. “Hopefully this will be the framework,” he said.

Should Opec strike a deal on Wednesday, the Saudi energy minister said he expected Russia and other countries outside of the cartel to cut about 600,000 b/d of production. The kingdom believes the co-operation of big producers outside of the cartel is necessary for any deal to be effective.

But he also criticised Russia’s public stance that freezing its production, which has climbed to a post Soviet-era high, was acceptable.

“Freezing at an all-time high is not a contribution. [It’s] not a match to what Opec is doing. Our discussion with Russia has been about a cut from non-Opec,” he said.

Yasser Elguindi at Medley Global Advisors said: “The comments suggest there is a growing convergence on positions between Saudi Arabia and Iran, which is essential for any deal … The big surprise would be a Russian contribution not just to freeze but to join Opec in cuts.”

Algeria’s energy minister Noureddine Boutarfa, one of the architects of the September accord to reduce output, said he was “99 per cent certain” Opec would reach a deal on Wednesday to cut production but did not provide any specifics.

The ministers held a breakfast meeting ahead of the formal gathering, an unusual step pointing to a last-minute push to improve the atmosphere among the group’s members who have been in disagreement since Algiers.

Abhishek Deshpande, analyst at Natixis, said: “A deal now looks more likely, but there are still obstacles to overcome in the meeting.”

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