Ex-leader of OPEC talks up output freeze

OPEC is on course to strike a deal with other oil producers to freeze oil output because its biggest members are already pumping flat-out, the group’s former president said.

While a similar initiative failed in April, a deal could now be reached as Saudi Arabia, Iran, Iraq and non-member Russia are producing at, or close to, capacity, Chakib Khelil said in an interview. Khelil steered OPEC in 2008, the last time it implemented an output cut, which was announced in Algeria that year.

“All the conditions are set for an agreement,” Khelil said. “Probably this is the time because most of the big countries like Russia, Iran, Iraq and Saudi Arabia are reaching their top production level. They have gained all the market share they could gain.”

OPEC and other producers will hold informal talks in Algiers next month. The possibility of OPEC action helped sparked a rally last week in oil markets. After falling below $40 a barrel in the beginning of the month, crude rose above $48 a barrel in trading inNewYork.

But many analysts remain skeptical that a freeze deal will be completed. Freeze talks collapsed in April as Saudi Arabia insisted Iran would have to limit its production, a condition the country rejected as it ramped up exports previously curbed bysanctions.

As producers are pumping at full tilt, the impact of any accord to prevent further increases would essentially be “psychological,” but nonetheless benefit the market, Khelil said.

In a separate interview, former Qatari Energy Minister Abdullah bin Hamad al-Attiyah said the re-balancing of supply and demand is proceeding slowly andthere is a need for global producers to act together and speed up the process. He said he was unsure that an agreement would be reached in Algiers.

“The freeze deal will not have a huge impact on fundamentals but it will help improve the market sentiments,” Al-Attiyah said. “At the end, a step taken is better than doing nothing.”