OPEC makes last-ditch bid to save oil deal as tensions grow

Russian Energy Minister Alexander Novak has repeatedly said his country prefers to freeze rather than reduce output.

On Friday, OPEC cancelled an experts meeting with non-OPEC producers scheduled for November 28 after Saudi Arabia said the organisation needed to sort out its differences first.

Algerian Energy Minister Noureddine Boutarfa presented a proposal for an OPEC cut of 1.1 million barrels a day during a meeting with his Iranian counterpart Bijan Namdar Zanganeh in Tehran on Saturday, according to an Iranian oil ministry official.

Saudi Arabia’s insistence that the market is close to rebalancing due to growing demand is backed by analysts at Goldman Sachs, who said Monday that the oil market’s tightening supported the likelihood that an OPEC deal will be struck.

The Kremlin said President Vladimir Putin spoke to Iranian President Hassan Rouhani and both highlighted “the importance of OPEC’s efforts to cap production as a key measure to stabilise global oil markets”.

Market watchers expected prices to remain volatile until OPEC’s Wednesday meeting offers the market a definitive answer as to whether OPEC and non-OPEC producers can agree on cuts.

As Commerzbank Research reported this morning, the Saudi Arabian oil minister declared over the weekend that the oil market “would be balanced next year even without production being lowered”.

Mixed signals from ministers of the Organisation of Petroleum Exporting Countries, however, are causing fresh volatility ahead of the meeting in Vienna today to nail down the deal.

The Saudi government’s budget deficit has ballooned to one-fifth of its economic output this year despite its $57 billion in spending cuts since oil prices collapsed.

OPEC said it would exempt Iran, Libya and Nigeria from cuts as their output has been crimped by sanctions and unrest.

Razaqzada said that should OPEC come to an agreement, then oil prices would likely rise above $50 per barrel, and if the group failed to agree anything, prices would fall towards, though unlikely below, $40 per barrel.

Since it reentered the worldwide markets, Iran has argued it wants to raise production to regain market share lost under Western sanctions, when its political arch-rival Saudi Arabia increased output. Peaking from $114 per barrel in June 2014, crude oil prices were trading near $27 per barrel around the beginning of this year. Those two countries are still insisting they are excluded from any supply cut quotas given they are still in the final stages of getting back to somewhere near full pumping capacity.