Hopes of reaching OPEC output cut deal increase despite Iran, Iraq hesitation

Hopes are high that the Organization of Petroleum Exporting Countries (OPEC) will be able to reach an agreement regarding the proposed oil production cuts among its members as the group’s November 30 deadline draws nearer.

At a meeting in Vienna earlier this week, Ibrahim Waya, a delegate from Nigeria, said that the group is on course to finalize the details of the Algiers accord to cut oil production. The delegate is hopeful saying, “There is certainty that everybody is on board,” despite hesitations from other countries like Iran and Iraq.

But oil traders and analysts have also grown more confident this week that OPEC will reach a deal to curb global oversupply. After a first day of talks in the Austrian capital on Monday -a warm-up for a ministerial meeting next week – Libyan OPEC Governor Mohamed Oun said the discussions went well. Oil has risen 6.9% in New York this week, the biggest two-day gain since September.

In September, OPEC proposed limiting output to a collective 32.5 million to 33 million barrels per day (bpd), which would be its first cut since 2008. The group’s own estimates show production at 33.6 million bpd last month.

However, demands from some members to be exempt from the output cuts remain to be a major stumbling block for the finalization of the Algiers accord.

Iran has sought special treatment since it is newly free of international sanctions, while Iraq has contested OPEC’s production estimates that would form the basis for the accord. This week’s meeting in Vienna, alongside intensive diplomacy among member states, is aimed at resolving those differences.

“The Algerian plan is the only plan that has been on the cards,” Waya said. It would be a six-month agreement to take effect in January, he added.

The original proposal discussed in the Algerian capital was for every member, with the exception of Libya, Nigeria and Iran, to reduce their output by 1.6% from the average January-to-August level. That would take group production to 32.4 million bpd, with Saudi Arabia cutting by 442,000 bpd and Iraq trimming 135,000 compared with August levels.

OPEC has spent almost two months since the Algiers meeting trying to work out how to share out supply curbs. Iraq has since sought an exemption from making cuts, arguing that its fight against Islamic State justifies special treatment. According to Oil Minister Jabbar al-Luaibi, Iraq will make “new proposals” to help reach an agreement.

Non-OPEC nations including Russia, the world’s largest energy exporter, will meet with OPEC members in Vienna on November 28 to discuss cooperation on oil-supply curbs. Energy Minister Alexander Novak has repeatedly said Russia would prefer to freeze output at current record levels than make cuts.