OPEC Deal in Jeopardy Unless Saudi Arabia Steps Up

Tough negotiations await a group of OPEC experts as they meet their counterparts from other oil producers such as Russia on Oct. 28-29 to hammer out details of an output-capping agreement, with disagreements threatening to scupper the deal.

OPEC agreed in Algeria last month on a modest oil-production cut in the first such pact since 2008, with the group’s top producer Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices.

But cracks have surfaced in the Algiers agreement, which would reduce output to a range of 32.5-33 million barrels per day (bpd), and Saudi Arabia may have to offer a major concession if it wants to cement the accord.

Saudi Arabia and its Gulf OPEC allies are already willing to cut 4 percent from their peak oil output, energy ministers from the Gulf countries told their Russian counterpart this week, sources familiar with the matter told Reuters.

Iraq, OPEC’s No. 2 producer, said this week that it would not cut output and should be exempted from any curbs as it needs funds to fight Islamic State. Baghdad’s stance is likely to face opposition from Riyadh and its Gulf allies, OPEC sources said.

“I expect it to be a very tough meeting,” one OPEC source said of the expert talks in Vienna.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza