Tuesday 27 June 2017

Saudis want common Opec stance agreed before deal with other oil-producing states

Mohammed Barkindo, secretary general of Opec, with Venezuelan president Nicolas Maduro at the presidential palace in Caracas earlier this month Photo: Carlos Becerra/Bloomberg
Mohammed Barkindo, secretary general of Opec, with Venezuelan president Nicolas Maduro at the presidential palace in Caracas earlier this month Photo: Carlos Becerra/Bloomberg

Rania El Gamal

Top Opec oil exporter Saudi Arabia has told the producer group it will not attend talks today with non-Opec producers to discuss limiting supply, Opec sources said, as it wants to focus on having consensus within the organisation first.

The meeting in Vienna was planned to discuss the contribution that producers outside Opec will make to a proposed supply-limiting agreement. Opec oil ministers meet on Wednesday in an effort to finalise their deal.

"There is an official letter from (Saudi Arabia) saying (it is) not attending the meeting because the ministers should agree to the cut and then present the agreement to non-Opec countries," an Opec source said. "This will be more effective."

Opec (Organisation of the Petroleum Exporting Countries) is trying to cement a preliminary September agreement in Algeria that would reduce its production to between 32.5 million and 33 million barrels per day, its first supply curb since 2008.

Opec aims to remove a supply glut and prop up oil prices, which at below $48 a barrel are less than half their level of mid-2014. Oil prices extended an earlier decline on Friday after news of the Saudi no-show.

The organisation also wants non-Opec producers such as Russia to curb output. Russian Energy Minister Alexander Novak said on Thursday that Opec had proposed that non-Opec cut oil production by 500,000 bpd.

Today's talks will be converted into another Opec-only meeting, Opec sources said, to try to resolve the group's internal differences before the ministerial gathering on Wednesday.

A similar Opec and non-Opec meeting in October resulted in no specific pledges from outside producers to cut output, with attendees citing the lack of an internal Opec agreement.

Saudi Arabia had asked that this earlier meeting be called off, but was convinced by other members to attend in order not to embarrass the group, a source said.

Despite extensive diplomacy, the Opec side of the deal still faces setbacks from Iraq's call for it to be exempt and from Iran, which wants to increase supply because its output has been hit by sanctions.

A meeting of Opec experts last week made some progress in how to implement the cut, but Iran and Iraq raised conditions for participating, according to sources.

"We have to solve our problems as Opec first. We have not achieved an agreement within Opec," a Gulf source familiar with Saudi oil thinking said on Friday.

"Before we meet with non-Opec and ask them to participate in any action, we have to have an agreement that is credible, with clear numbers and a system that the market believes."

Opec last persuaded non-Opec nations to make joint cuts at the start of the millennium. Nonetheless, Opec believes rival producers need to help in the current effort.

Its Economic Commission Board, comprised of representatives of the 14 Opec countries, concluded a two-day meeting at the group's Vienna headquarters last Thursday.

Reuters

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