Ahead of Wednesday’s crucial meeting of the Organization of the Petroleum Exporting Countries, pessimism persists whether members would reach a consensus on last September’s output cut resolution to stabilize crude oil market and push up prices.
The meeting scheduled for Vienna, Austria is expected to decide on the implementation of an agreement to reduce crude oil production by about one million barrels per day (bpd), from about 33.82 million bpd in October.
During the September meeting, a high level committee was constituted to develop a framework for consultations between OPEC and non-OPEC producing countries towards the implementation of the ‘Algiers Accord’ on output cut by November 2016, to stabilize prices.
At the opening of the first meeting of the committee in October, OPEC Secretary General and Nigeria’s Mohammed Barkindo, underlined the need for OPEC and non-OPEC members to unite and take a coordinated and timely action for the common good of the group.
Since then, Mr. Barkindo had embarked on a series of diplomatic shuttles to key member-countries to consult and secure the buy-ins of the two factions, as well as the urgent action to build a formidable consensus ahead of the meeting on Wednesday.
Part of the urgent action, he explained, included the development of a long-term framework for regular, structured and sustainable consultation with non-OPEC producers.
On November 19, Mr. Barkindo met with the Iranian Minister of Petroleum, Bijan Zanganeh, in Tehran to solicit his continued support for the implementation of the Algiers Accord and the need for cohesive action by OPEC and non-OPEC producers in the spirit of equity, fairness and transparency.
The OPEC scribe also made a similar trip to Caracas, where he met with the Venezuelan President, Nicolas Maduro, to discuss the need to bring forward the oil market rebalancing and return stability to the market.
Urging OPEC members to be flexible, by giving due consideration to the collective interests of the group, Mr. Barkindo said there was sufficient will to agree to develop new mechanisms and strategies to stabilize the market.
Equally, during a similar meeting with Ecuador’s President, Rafael Correa, in Quito, discussions centred on the need for commitment for “cohesion and consensus” among OPEC members’ resolve for a sustainable market stability.
But, a pall of pessimism still hung in the air on Tuesday about a positive consensus on the issue on Wednesday, as key OPEC members and non-OPEC producers appear to be disagreeing over some sticky issues.
Iran and Iraq are resisting pressures from Saudi Arabia to cut oil production in line with the Algiers’ Accord.
During the September resolution, Iran was one of three countries exempted from the proposed output cut, for various reasons.
Nigeria was exempted to afford it the chance to recover from the negative impact of incessant attacks on its oil facilities by armed militant groups in the Niger Delta region, which resulted in a massive cut in its production and exports.
Libya was granted exemption for a similar reason, following series of attacks on its oil facilities by terrorists groups operating in that region in recent months, while Iran was excluded to allow it settle down and recover, after serving years of U.S.-imposed sanctions, including restrictions on its oil production and exports.
Ahead of the meeting on Wednesday, the Russian Energy Minister, Alexander Novak, had already announced he would not be attending the meeting.
Agency reports said a meeting of experts in Vienna on Monday failed to resolve disagreement on the details of the proposed cut between Saudi Arabia, Iran and Iraq, reputed to be OPEC’s biggest oil producers.
While Iran wants to raise production from about 4 million bpd to 4.2 million bpd, to regain lost market supply capacity as a result of the U.S.-imposed sanctions, Iraq said it needed to produce more to boost its earnings to finance the war against the militant group, Islamic State.
The pervading pessimism is already impacting crude oil prices negatively at the international oil market, with Brent crude price dropping by about 1.8 per cent, from $48.81 per barrel sold on Monday, to about $47.45 per barrel on Tuesday.
The lack of consensus by OPEC and a possible impact on price if there is not output cut on Wednesday is not good news for developing economies depending on oil, including Nigeria, currently struggling with the negative impact of declining global crude oil prices on its revenue base.