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OPEC does not actually need to cut production to rebalance the markets, according to Saudi Oil Minister Khalid al-Falih. In a surprising U-turn, after two months of negotiations aiming to convince all OPEC members that a cut is vital, the group’s largest producer now believes the market can rebalance itself without intervention.
However, Al-Falih allowed that the “OPEC intervention aims to expedite this balance and the market recovery at a faster pace.”
He further suggested that a freeze at current production levels—rather than a cut—could also take care of the glut problem.
This is not Algeria’s narrative, nor is it Venezuela’s, or many other OPEC members. According to information reported by Iran’s Shana agency, Algeria is calling for a cut of 1.1 million barrels, which is at the upper end of the range that had originally been discussed by OPEC members, but shy of the 4-4.5% proposed last week. Shana quoted Algeria’s Energy Minister Noureddine Boutarfa after he met with Iran’s Bijan Zanganeh.
An earlier report quoted sources from the organization as saying the cut that was being discussed was in the range of 4-4.5 percent of OPEC’s total production for October, which is more than the 1.1-million-bpd cut suggested by Algeria, using secondary sources.
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Judging by Al-Falih’s latest remarks, it looks like Saudi Arabia may not be on board with either suggestion.
The minister, who spoke to media yesterday at the HQ of Aramco, also said the country was upbeat about crude oil demand next year, and in particular, demand for Saudi oil. Still, when asked if Saudi Arabia was planning to keep its output at current high levels (10.6 million bpd in November), Al-Falih declined to give a straight answer, saying only that demand for Saudi crude was “healthy”.
Further reinforcing the notion that Saudi Arabia is no longer a devout proponent of the cut, Al-Falih, just last week, bowed out of a meeting with non-OPEC producers, including heavyweight Russia, which was supposed to take place on Monday, just two days before the OPEC meeting in Vienna, saying there was no internal OPEC agreement on policy. The meeting was subsequently canceled, and all eyes will be on the November 30 OPEC meeting in Vienna.
By Irina Slav for Oilprice.com
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