Oil prices soar to new high as OPEC deal nears certainty

Prices today were initially boosted by comments from a Nigerian official attending the OPEC technical meeting that it was likely all countries would be “on board” by the end of the day.

Officials leaving the Organization of Petroleum Exporting Countries headquarters in Vienna told reporters they have agreed on most details and that they were happy with the outcome of Tuesday’s talks. “Everyone knows that the stakes are high”, he said.

Oil market turbulence caused oil prices to plunge from $115 per barrel in June 2014 to less than $30 per barrel in January 2016, causing hardship for oil exporters and placing a number of global oil producers at risk of bankruptcy.

The final decision regarding the agreement is expected at the OPEC meeting on November 30 in Vienna. “We have talks with these companies, complicated talks, and we cut the finance of unnecessary spending programs” while supporting the continuity of funding necessary to raise oil output, he said. The group agreed to a collective production cut of between 32.5 million and 33 million barrels a day in September, saying it would work out individual quotas before its November 30 summit.

The main hurdles to finalizing the Algiers accord have been demands from some members for exemptions from cuts. But it added that “investor positioning data and price action suggest the market remains unconvinced”, and that net long positions, which would profit from rising prices, were still at lows not seen since oil hit $27 per barrel earlier this year.

Brent crude futures were trading at $48.42 at 0753 GMT, down 58 cents, or 1.2 percent, from their last close, although overall activity was thin after the U.S. Thanksgiving holiday and ahead of the weekend. That remains the main proposal being considered, Nigeria’s Waya said.

Members have accepted that Iran’s situation may warrant special treatment – and given its recent history of conflict Iraq is likely to also look for special terms.

Some bank experts predict that Saudi Arabia and other Gulf countries may cut production, provided that the other members of OPEC will not increase production.

“OPEC has to come up with some sort of an agreement, otherwise it’s a big loss of credibility, especially after Saudi Arabia has been quite outspoken about getting a deal”, said Norbert Ruecker, head of commodity research at Julius Baer Group Ltd.in Zurich.

Iraq’s oil minister Jabbar Al-Luaibi has insisted his nation should be allowed to maintain its September output of 4.7 million barrels per day. Opec ministers scheduled a breakfast with non members including Russian Federation prior to the group’s Nov 30 summit, two people said. “Which is the language that everybody will be interested in”. Tehran was reportedly asked to cut 4.5% from a higher ceiling of above 3.92 MMBPD, capping volumes at 3.79 MMBPD.