OPEC deal a tough task, as oil output freeze expectations rise

Mon Aug 15, 2016 3:48pm EDT
 
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By Rania El Gamal and Alex Lawler

DUBAI/LONDON (Reuters) - OPEC will probably revive talks on freezing oil output levels when it meets non-OPEC nations next month as top exporter Saudi Arabia appears to want higher prices, according to OPEC sources, although Iran, Iraq and Russia present obstacles to a deal.

Riyadh sharply raised expectations for a global production deal between on Thursday when Energy Minister Khalid al-Falih said Saudi Arabia will work with OPEC and non-OPEC members to help stabilize oil markets.

"The comments by the Saudi energy minister give a ‎positive indication that they are willing to go for a freeze deal but the question remains: on what level?" said an OPEC source from a key Middle Eastern producer.

"Will the freeze be at January levels? And what about Iran‎?And then there is Nigeria, which has lost a lot of production since January," the source added.

Only days after Falih's remarks, Energy Minister Alexander Novak was quoted as saying Russia is consulting with Saudi Arabia and other producers to achieve oil market stability, adding that the door is still open for more discussions on output freeze, if needed.

Saudi Arabia, together with Russia and the United States a rival for the position of the world's top oil producer, boosted output to 10.67 million barrels per day in July from 10.2 million in January, when the freeze idea first emerged.

Since 2014, Saudi Arabia, OPEC's de facto leader, has been raising output to drive higher cost producers out of the market and win back share from rivals such as the United States, where output soared on the back of the high oil price of the past decade.

As a result, oil prices LCOc1 collapsed to $27 per barrel in January from as high as $115 in mid-2014, capping output of the United States but also hitting hard Saudi Arabia's budget and resulting in a record fiscal deficit for Riyadh.   Continued...

 
A worker walks past a drilling rig at a well pad of the Rosneft-owned Prirazlomnoye oil field outside the West Siberian city of Nefteyugansk, Russia, August 4, 2016. REUTERS/Sergei Karpukhin/File Photo