OPECs internal disagreements over how to implement oil-supply cuts agreed to last month avoided a deal to procure the cooperation of other major suppliers.
More than 18 hours of talks over two days in Vienna yielded little more than a promise that the worlds largest oil producers would keep on talking. Deliberations will continue in late November, just days before the Organization of Petroleum Exporting Countries is supposed to finalise the accord that lifted oil prices to one-year highs.
Non-OPEC nations objective talks with the group on Saturday without making any render commitments, Brazils Oil and Gas Secretary Marcio Felix said after the meeting. Brazil wont curtail its oil production, though its willing as early as next year to host future OPEC meetings with the worlds biggest producers, he said in a phone interview.
Azerbaijans Energy Minister Natiq Aliyev said the outcome of the process hinges on Iran and Iraq, two nations that are more interested in increasing production than reducing it. While Saturdays meeting was a successful first step, oil-producing nations need to continue dialog and come up with real numbers before cuts can begin, Kazakhstans Deputy Energy Minister Magzum Mirzagaliyev said in an interview after the meeting.
Risk of Failure
A deal wasnt possible because internal OPEC talks on Friday reached an impasse over the role of Iran and Iraq, both of which want to be exempt from any cuts. While non-member Oman told Saturday it was willing to cooperate in a furnish deal, it couldnt commit to a specific output cut until OPEC had its own agreement.
OPECs surprise agreement in Algiers to make the first render cuts in eight years will only make a serious dent in a record petroleum surplus if producers outside the group are participating in. While the accord helped push oil prices to a 15 -month high above $50 a barrel earlier this month, they have subsequently fallen as several members disputed the production estimates that would determine the size of cuts. Failing to implement last months accord will hurt oil producers, the organizations top official warned.
Its more likely that OPEC will come away with no decision in November than that theyll reach an agreement, Fabio Scacciavillani, chief economist at the Oman Investment Fund, said in an interview in Dubai on Sunday. If they are able to agree, it will likely be a wishy-washy bargain thats hobbled by too many exemptions.
OPEC agreed in the Algerian capital on Sept. 28 to reduce output to a range of 32.5 million to 33 million barrels a day, compared with about 33.4 million in September. Fridays meeting of technical experts from members of the group was intended to finalize details of how those supplying curbs would be shared. Talks with non-OPEC nations on Saturday sought to seek wider participation in cuts.
On Saturday , no concrete output limits for non-OPEC countries were discussed, two participants said. Attendees did discuss differences between nations own oil-production data and sources used in OPECs own calculates, which have been disputed by members including Iran, Iraq and Venezuela, one of the people said.
Russia reiterated that it is willing to freeze production, rather than cut, but only if there is an internal OPEC agreement first, the people told. The largest producer outside OPEC is pumping at a post-Soviet record of about 11.1 million barrels a day.
As the meeting opened in Vienna, OPEC Secretary-General Mohammed Barkindo warned of the consequences if producers dont follow through on the Algiers agreement. The price recovery has already taken far too long and producers cant danger delaying it further, he said.
Representatives of Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia attended Saturdays meeting with officials from OPEC member states. Those countries collectively made about 19.6 million barrels a day of oil last year, about 21 percentage of global supply and equivalent to that given to half of OPECs output, according to BP Plcs Statistical Review of World Energy.
Oman is willing to cut production as part of a deal with other producers, but is waiting for OPEC to reach an internal agreement before deciding on the size of its own supplying reduction, told Ali al Riyami, the nations representative at the session in Vienna. The Middle Eastern nation pumped about 1 million barrels a day in May.
Brazil attended the talks only as an observer, Felix said before the session. The Latin American country will boost output by 290,000 barrels per day next year to 2.9 million a day, the biggest increase of any non-OPEC nation, according to the International Energy Agency. Production will keep growing for the next few years, Felix said.
Brazils output is decided by publicly traded companies, he told. There is nothing the government can do about it.
Kazakhstan also plans to boost output next year following the restart this month of the $50 billion Kashagan oil field after 16 years of development. The field is currently pumping about 100,000 barrels day, which should rise to 200,000 by year-end and 370,000 by the end of 2017, Italian oil company Eni SpA said Friday.
The Kashagan launch is a huge deal for us and we are not ready to abandon it, we are not planning that, said Mirzagaliyev, the nations deputy energy minister.
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