In what is now the umpteenth twist in highly-charged OPEC rhetoric in recent days, the cartel’s biggest producer and de factor leader, Saudi Arabia, has reportedly told the organization that it would not attend talks with non-OPEC producers on output cuts, which were supposed to take place on Monday in Vienna. Instead, Saudi Arabia wants OPEC members to agree on a deal before sitting down with non-OPEC producers, in a sign that the details of any non-OPEC support, if any is to be had at all, will not be ironed out until after the meeting on 30 November.
It also may mean that Saudi Arabia finds any non-OPEC talks pointless without having their own issues are sorted out (issues that mainly include Iran at this point, and possibly Iraq). A sentiment that has been echoed by Russia in the past, who had previously agreed to freeze production if OPEC first agreed on a deal amongst themselves.
Without Saudi Arabia in attendance, OPEC and non-OPEC nations are scheduled to meet on November 28, just two days before the OPEC ministerial meeting on November 30. A meeting that that many hope will finalize the much-hyped production cuts plan aimed at lifting crude oil prices.
“Since OPEC has not reached agreement there is no need to have a meeting with non-OPEC. If these problems are still ongoing what is the point of meeting?” the Financial Times reported on Friday, quoting a person familiar with the Saudi oil policy.
Next week, OPEC is set to discuss a cut by all members except Nigeria and Libya—a plan which will cut by between 4 percent and 4.5 percent of their output, Reuters reported earlier this week, quoting OPEC sources.
However, Iran and Iraq continue to be the stumbling blocks to a deal, demanding special treatment because of sanctions and the war on Islamic State, and disputing OPEC’s secondary sources data which puts their respective production lower by a couple of hundred thousand barrels per day.
Iraq stunned the markets just a day after reports of the 4-4.5 percent cut circulated. Baghdad signaled that it may be willing to cut, because whatever it could lose with lower production, it would gain with higher oil revenues.
The Saudi unwillingness to attend a meeting with non-OPEC producers -which include Russia - until an all-OPEC deal is first agreed upon, may also be viewed as a statement about just how fed up Saudi Arabia is with Iranian—and possibly Iraqi—obstinacy. Just yesterday, the oil minister of Azerbaijan, Natig Aliyev, was quoted as saying the cartel now may demand cuts from non-OPEC nations too, and may want non-OPEC producers to cut production by as much as 880,000 bpd. Russia, which has said it supports a freeze but has never spoken or backed cuts to its own production, floated the concept of a ‘pro-forma’ cut, saying that by keeping its production fixed, it would be an effective ‘cut’ to its 2017 production plan.
