x Abu Dhabi, UAEWednesday 26 July 2017

Opec pushes for commitment to oil production freeze ahead of meeting

The gathering in Doha has a date, but not yet a clear purpose.

Saudi minister of oil and mineral resources Ali Al Naimi, left, and Qatari minister of energy and industry Mohammed Saleh Al Sada at a press conference in Doha, in February. EPA
Saudi minister of oil and mineral resources Ali Al Naimi, left, and Qatari minister of energy and industry Mohammed Saleh Al Sada at a press conference in Doha, in February. EPA

The main actors behind efforts to arrange an oil production “freeze” are trying to get a deal back on track for next month’s meeting, although the purpose of the gathering remains hazy.

The Qatari oil minister and current Opec president, Mohammed Al Sada, said last week that a meeting of “Opec and non-Opec producers” had been scheduled for April 17 in Doha.

His statement followed the cancellation of a similar meeting that had been scheduled for yesterday to follow up on a previous meeting between the oil ministers of Russia, Saudi Arabia, ­Qatar and Venezuela in Doha last month.

It is not yet clear who will attend the Doha meeting, although Mr Al Sada has said that 15 Opec and non-Opec producers, accounting for about 73 per cent of global oil output, “are supporting this initiative”.

The oil minister of Oman, which is not an Opec member but produces about 1 million barrels per day, mainly for export, said yesterday that he had not yet received an invitation.

The UAE energy ministry could not say whether its minister would attend, but it has said it would commit to the freeze if other major producers also participated.

The UAE is on track to increase production to 3.2 million barrels per day by the end of next year, from 2.8 million bpd at the end of last year.

The major hold-up to a freeze agreement had been getting Iran on board, and it still refuses to curb its production, at least until it has risen back to the level it stood before international nuclear-related sanctions were imposed in 2012.

Opec has said Iran already increased production by 187,800 bpd to 3.13 million bpd after sanctions were lifted last month, the biggest monthly gain since 1997, and it plans to push to 4 million bpd as soon as infrastructure repairs will allow.

Russia has taken on the role of “honest broker” and its energy minister, Alexander Novak, said last week after meetings with his counterpart in Tehran: “On the whole, Iran supports the need for coordination between oil exporters, including a possible freeze. But Iran’s position is that they have to first restore their production volumes ... After that, they are ready to join the freeze.”

With so many gaps to fill concerning who will participate, what a freeze will entail, how it would be monitored and so on, the main object of holding such a meeting would seem to be symbolic.

Nevertheless, analysts say any deal will need to have at least the semblance of substance.

“There has already been a ­rally in oil based on the meeting in Doha taking place, but news alone cannot keep lifting the price – there will need to be a positive outcome or a commitment to continued dialogue,” said Nour Eldeen Al Hammoury, the chief market strategist at ADS Securities in Abu Dhabi.

Opec representatives gathered last week for closed-door meetings in Vienna to discuss oil price volatility and market regulation.

“The presentations noted the impact of low prices on [US] shale production, the lag times and the low usage of rigs,” said Jorge Montepeque, an analyst who attended. “But ... Iran, the poor economic performance in China and the obvious ongoing inventory builds [mean] the fundamentals continue to point to a rough ride for oil prices, with producers still very worried.”

The urgency may overcome the scepticism. Plus, Mr Montepeque adds, there was talk among both the Opec and non-Opec delegates that broader geopolitical concerns – that is, the common Saudi Arabian and Russian interest in Syria – may also push some kind of deal in Doha.

amcauley@thenational.ae