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OPEC technical meeting begins in Vienna -
Saudi minister Falih downplays need for OPEC action -
Algeria, Venezuela ministers travel to Moscow -
Libya’s NOC says cannot cut for «foreseeable future»
OPEC on Monday kicked off what is expected to be a contentious, marathon technical meeting, in what could be a last gasp to save a tenuous output freeze as the producer group’s divisions appeared to widen over the weekend.
OPEC is trying to clinch what would be its first coordinated cut since 2008 to help accelerate the market’s rebalancing, but positions have hardened over individual country quotas, exemption requests from certain members, and which production figures to use.
The technical meeting, attended by representatives — but not ministers — of the group’s 14 members, comes two days before OPEC’s formal ministerial meeting on Wednesday, the self-imposed deadline for the group to finalize the freeze agreement first announced in Algiers in late September.
* Read S&P Global’s pre-OPEC meeting commentary
That deal set a ceiling for the group of between 32.5 million and 33 million b/d, which would require a cut of between 640,000 to 1.14 million b/d from its October levels, according to OPEC’s own estimate.
«We are still hopeful for a deal,» Mohamed Oun, Libya’s OPEC governor, said as he entered the meeting.
The technical meeting is taking the place of talks that had been scheduled for Monday between OPEC and major non-OPEC producers, including Russia, Azerbaijan and Kazakhstan, which the organization is courting to join its freeze efforts.
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But with OPEC having yet to agree among itself on an output deal, despite two previous rounds of technical meetings and several negotiations between individual ministers, Saudi Arabia said on Friday it would not be attending that meeting, eventually prompting the organization to cancel it entirely.
Analysts with Citi said in a note Friday that the Saudi withdrawal «does underscore how fragile the situation may be.»
MINISTERIAL TALKS
Saudi energy minister Khalid al-Falih on Sunday appeared to downplay expectations for OPEC to reach an accord, saying that the market was already rebalancing on its own without any help from OPEC.
«We expect demand to recover in 2017, then prices will stabilize, and this will happen without an intervention from OPEC,» Al-Falih told reporters at Saudi Aramco headquarters, according to multiple reports. «We don’t have a single path … at the OPEC meeting.»
Iran’s official Mehr news service on Sunday blasted geopolitical rival Saudi Arabia for «reneging on earlier promises» and waging «a full-blown psychological war against Iran and a number of other OPEC members.»
Given the recent rise in Libyan production, as well as the potential return of Nigerian output, along with record-high Russian production, OPEC likely will have to make a significant cut to have an impact on the market and mop up excess supply.
While the technical meeting is going on, Algerian energy minister Noreddine Bouterfa and Venezuelan oil minister Eulogio del Pino are traveling to Moscow to meet with their Russian counterpart Alexander Novak, according to Algeria’s energy ministry.
Russia has said it would be willing to freeze its production, albeit at record levels of some 11.2 million b/d, only if OPEC can get unanimous agreement on its own output restraint.
Bouterfa has been acting as a key go-between in negotiations, according to sources, while Del Pino has been among the most vocal in OPEC in calling for production restraint to prop up prices.
Bouterfa will also hold bilateral meetings with Iraq, Saudi Arabia and Qatar in Vienna before Wednesday’s OPEC ministerial summit, the ministry said. He met on Saturday with Iranian oil minister Bijan Zanganeh to present the latest proposal that would see OPEC cut production by 1.1 million b/d, while asking non-OPEC producers to cut by a combined 600,000 b/d, according to Iranian oil ministry news service Shana.
Left unresolved was how those cuts would be divvied up among the countries, a major sticking point holding up a deal.
«Everybody agrees with the decision made in Algiers. Now, it’s about how to divide it [the proposed OPEC cut] between the members,» Zanganeh said, according to Shana.
EXEMPTIONS IN FOCUS
Libya and Nigeria are reportedly exempt from any deal, while Iran and Iraq have also requested exemptions.
However, Saudi Arabia, OPEC’s largest producer, is not amenable to exempting Iran and Iraq, saying that any cut burdens have to be shared equitably and transparently, as the kingdom withdraws from its long-standing role as the market’s sole significant swing supplier.
Iran, which told OPEC it produced 3.92 million b/d in October, has been insistent on its right to regain its pre-sanctions market share of some 4 million b/d before agreeing to output restraints, while Iraq, which said it produced 4.78 million b/d in the month, has said it is entitled to an exemption as it fights the Islamic State on behalf of the world.
Both self-provided figures are far higher than independent estimates — another dispute that OPEC will have to resolve in talks this week.
Saudi Arabia and other OPEC members have insisted on using the independent estimates, while Iraq, Iran and Venezuela have complained that those estimates undercount their production.
The head of Libya’s National Oil Corporation, meanwhile, said his country would not be able to participate in any OPEC production cuts «for the foreseeable future.»
The war-torn country, which has seen its production double since the lifting of force majeure at its formerly blockaded ports, needs as much revenue as it can get from its oil, NOC Chairman Mustafa Sanalla said at the Arab-Austrian Economic Forum in Vienna on Friday.
«Libyan oil can be a force for unity if it is allowed to flow freely,» he said.
–Staff reports, newsdesk@platts.com
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