Saudi Arabia’s Opec sway limited by resurgent Iraq and Iran

Oil futures flipped to gains Wednesday after Iraq officials said the country would cut production along with OPEC and USA inventories showed an unexpected decline.

Oil prices turned positive on Wednesday despite investor doubts that OPEC will agree to a production cut large enough to make a significant dent in the global glut of crude.

Brent for January settlement was unchanged at $49.12 a barrel on the London-based ICE Futures Europe exchange, a $1.15 premium to WTI.

The comments by Abadi are the clearest indication that Iraq will support an OPEC plan to cut production by between 4 to 4.5% when it meets on November 30th in Vienna. “If OPEC does successfully reach an agreement, prices are likely to test the year high in Brent of $53 per barrel”, ANZ bank said in a note to clients on Thursday. One, oil exporters are near capacity levels after the production ramp-up in October; two, it revised global balance in the second half of 2017, owing to stronger-than-expected demand growth; and three, “more evidence” that a price level of $55/bbl is required for high-cost producers to resume operations. Under the group’s preliminary accord reached late September in Algiers, collective output would drop to as little as 32.5 million barrels a day.

Sources said Saudi Arabia and its Gulf allies have signalled they were prepared to cut close to 1 million bpd of their output.

“As it stands today, the proposal pushes for production cuts from Iran and Iraq (albeit from potentially higher levels), both of whom have thus far argued for exemptions, whilst OPEC members want Russian Federation to play a larger part in the deal and join in cuts”, noted Goldman Sachs on Wednesday.

Petroleum import from non-OPEC countries averaged 6.662 million barrels per day in therepoerted period, as compared to averagely 6.720 million barrels per day in the same period in 2015.

Since oil prices collapsed in 2014, Venezuela has been among the most vocal in pushing both OPEC and non-OPEC countries to slash output. However, they warn that there are no guarantees for the deal to be agreed. Iraq and Iran have been at the forefront of a group of countries claiming they deserve exemptions and that other OPEC members should lead the cuts.

Iran has added about 880,000 barrels per day since the loosening of sanctions.

In public, OPEC delegates characterized this week’s meeting as progress. “The market is divided in its opinion. that’s why the market is not moving much”, said Olivier Jakob of Petromatrix consultancy in Switzerland.

OPEC’s next official meeting is on November 28, when members will speak with non-OPEC oil producers including Russian Federation, the world’s biggest oil producer.