Opec scram­bles to agree on out­put cut

> Fail­ure will send oil prices tum­bling, could spell the end of or­gan­i­sa­tion

The Sun (Malaysia) - - SUNBIZ -

VI­ENNA: Mem­bers of the Or­gan­i­sa­tion of the Petroleum Ex­port­ing Coun­tries (Opec) will seek to give oil prices a boost in Vi­enna to­mor­row by nail­ing down their first out­put cut in eight years, although a deal is far from cer­tain.

Fail­ure to get an ac­cord could send oil prices tum­bling and reignit­ing de­bate about the pur­pose of the 56-year-old or­gan­i­sa­tion.

Not get­ting a deal “could be the end of Opec”, en­ergy an­a­lyst Alexan­dre And­lauer told AFP. Pes­simism about prospects for an agree­ment sent oil prices lower on Fri­day.

In Septem­ber the car­tel agreed in prin­ci­ple to lower pro­duc­tion to 32.5-33.0 mil­lion bar­rels per day (bpd), mean­ing a cut of be­tween 600,000 and 1.1 mil­lion bpd.

This, Opec’s 14 mem­bers hope, will re­duce the mam­moth global sup­ply glut and so in­crease the mar­ket price of oil from its cur­rent painful level of be­low US$50 a bar­rel.

It also marks a re­ver­sal of Opec king­pin Saudi Ara­bia’s two-year-old strat­egy of flood­ing the mar­ket to squeeze out ri­vals, in par­tic­u­lar US shale oil pro­duc­ers.

Saudi En­ergy Min­is­ter Khalid al-Falih, who was due in Vi­enna for the talks with other Opec min­is­ters, said this month an agree­ment was “im­per­a­tive”.

But it re­mains to be agreed what size cuts, if any, each of Opec’s mem­bers will make, par­tic­u­larly Iraq and Iran, the car­tel’s next-big­gest pro­duc­ers af­ter Riyadh.

Strife-torn Libya on Sun­day ruled it­self out of any cuts, ar­gu­ing that it was in “such a dan­ger­ous eco­nomic sit­u­a­tion” that there was no way it could take part.

Iraq has said it will cut out­put but that it is short of money needed to fight IS ex­trem­ists. It also dis­putes with Opec the level of its cur­rent out­put.

Iran, newly free of ex­port re­stric­tions since last year’s nu­clear deal, says it will not cut pro­duc­tion un­til it has reached pre-sanc­tion lev­els.

Adding to the dif­fi­cul­ties is the fierce ri­valry be­tween Shia Iran and Sunni Saudi Ara­bia, en­gaged in a proxy war in Ye­men and back­ing dif­fer­ent sides in Syria.

As the meet­ing has ap­proached, Opec mem­bers turned their sights on non­car­tel pro­duc­ers, par­tic­u­larly Rus­sia, for a pledge they would also tighten the taps.

Se­cur­ing a com­mit­ment from nonOpec na­tions is im­por­tant be­cause the car­tel only pro­duces about a third of the world’s oil, mean­ing its abil­ity to in­flu­ence prices is limited.

A pocket cal­cu­la­tor is seen on steel prod­ucts at a steel works in Seoul.

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