OPEC deal stops short of setting firm limits

OPEC will complete an accord to cut production this month, while stopping short of setting the individual country limits needed to make the deal work, according to a Bloomberg survey.

The Organization of Petroleum Exporting Countries will finalize a pledge to reduce total output — its first cut in eight years — when the group meets on Nov. 30, according to 14 of 20 analysts polled this week. Yet only seven of the 20 said the group will specify how much each member should cut.

As a two-year slump in oil prices batters the finances of OPEC nations, observers from Bank of America Merrill Lynch to hedge fund trader Pierre Andurand are confident the group will act.

Yet the oil market remains “pessimistic,” according to BP Plc, as key producers Iran and Iraq seek to revive output lost to years of conflict and sanctions.

“It looks like there will be a deal, but not the deal that’s really needed,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt.

OPEC members will try to resolve the differences at impromptu talks in Doha this week, and will hold discussions there with Russia, the biggest exporter outside the group, which has signalled it’s prepared to freeze production.

As the global oil surplus enters a fourth year, it’s time for OPEC to concede that its attempt to clear the glut by pressing rivals with low prices has been a “failed experiment” and it should try something different, said Michael Tran, an analyst at RBC Capital Markets LLC.

Prices are languishing below US$50 a barrel, which leaves even richer nations like Saudi Arabia in a “tight spot,” said Francisco Blanch, head of commodity markets research at Bank of America.

With no accord to hold them back, OPEC members may revert to the competition and price-cutting that sent prices spiralling two years ago, according to Daniel Yergin, author of the Pulitzer Price-winning history of the oil industry, The Prize.