In the countdown to the OPEC meeting

29 November, 2016

The OPEC members will meet in Vienna on Wednesday to decide on the details of the output cut deal that was agreed in Algiers two months ago. The cartel is trying to reach an agreement to curb its supply for the first time since the financial crisis and put an end to a two-year downturn in crude oil prices.  But reaching this agreement has proved problematic with Iran and Iraq still back-pedaling.

Iran, which until last year was stifled with western sanctions, thinks that it deserves to be exempt from any production deal as much as Nigeria and Libya. According to Iranian Oil Minister Bijan Zanganeh, reviving the country’s oil output was "the national will and demand of the Iranian people." Iranian leaders argue that only the countries which ramped up production should bear the burden of the deal (hinting at Saudi Arabia and its Gulf allies). For obvious reasons, Saudi Arabia is not ready for such sacrifices. 

Brent crude oil futures fell to $48.60 earlier this morning on the jitters that OPEC producers will fail to hammer out an output cut. With just one day left before the meeting, there are still disagreements among the cartel’s members. Yesterday OPEC experts ended their talks without agreeing on concrete details of a planned reduction in oil output by individual countries. According to an OPEC delegate, Iraq and Iran continued to express objections over how to distribute output reductions. Countries fought to the very last barrel. Iran suggested cutting its production at 3.975 million barrels a day, or about 200,000 barrels a day above its current output. Saudi Arabia countered with a proposal for Iran to cap output at 3.707 million barrels a day. Meanwhile, Russian senior official claimed that they are not ready to reduce the oil supply suggesting only a freeze of production at current levels. That adds more difficulties for the negotiators to reach a deal. 

At the present moment, Brent oil futures are trading around $48.65. Without an OPEC agreement, the International Energy Agency predicts that the oil market will be oversupplied in 2017, which could cause prices to fall significantly. But Saudi Arabia’s Al-Falih is still optimistic in relation to oil prices even without an OPEC cut at this meeting mainly counting on the increase in oil demand next year.

The time used in the programme is the Vienna time (GMT+1); to get the Metatrader time you should add 1 hour (Metatrader time is GMT+2). 

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