VIENNA—Iran and Russia have appeared as an obstacle to cuts in oil production globally, at a time when the Organization of Oil-Producing Countries held diplomatic efforts coming from the last minute prior to their meeting Wednesday.
The OPEC agreed in September to cut production to reduce excess global production of crude oil, but left the details about how much to cut for Wednesday’s meeting in Vienna. This meeting is presented two years after the OPEC decided to let the prices fall, in times when the market fell to historical lows which opened the way to a period of low prices for consumers.
Russia, which is not part of OPEC, said last week that it was willing to maintain its production at existing levels, but not agreed to reduce the amount it pumps, which is the largest of any country. Iran said Saturday that it negotiated an exemption to the cuts, the third one within the cartel of 14 countries, behind Saudi Arabia and Iraq.
Officials saudis are concerned by the reluctance of these two countries to join the cuts, according to officials of the OPEC, as they fear that if they reduce their production, other countries will take advantage and take away market share in the kingdom, such as occurred during the decade of the 80. While countries that have suffered interruptions in their production, such as Nigeria and Libya likely to receive exemptions, the officials saudis don’t want to make sacrifices in order to then allow that to Iran, its rival, continue to increase their production.
on Sunday, the minister of Energy arabia, Khalid al-Falih, indicated that the oil market is rebalanceará by himself, and questioned the need for cuts in production, according to Reuters.
Saudi Arabia abandoned an agreement in April to which members of OPEC and Russia to freeze its production to a certain level due to which Iran did not attend. Iran and Saudi Arabia have been rivals for power in the Middle East since many years ago and are on opposite sides of brutal conflicts in Syria and Yemen. Saudi Arabia is majority sunni, while Iran is majority shia.
oil prices rose on Monday, with Brent crude rising 1,84% to US$ 48,11 and the West Texas moving 1.85% at US$ 46,91.
The ministers of Oil of Algeria and Venezuela Noureddine Bouterfa and Eulogio del Pino, traveled to Moscow on Monday to try to convince the russians. Meanwhile, the representatives of the OPEC, gathered at its headquarters in Vienna to try to resolve their differences behind closed doors.
At the meeting, iranian officials and iraqis indicated that they would consider freezing its production, although it is not yet known if these levels would be sufficient for the saudis, according to a source.
Russia wants the prices to go up, because it depends on oil and gas for a little less than half of their national income. However, the country has less room to maneuver than Saudi Arabia, since a large part of the oil industry in Russia is still under the sanctions of the west and its fields in Siberia could suffer damage if they suspended operations.
For its part, Iran has less incentive to cut its production.
The country is trying to recover the market share they enjoyed prior to the sanctions of the west because of its nuclear program arruinaran to its energy industry. Even at low prices, to Iran’s benefit to build relationships with the refineries, european and asian buyers.
iranian Officials say they want to pump nearly four million barrels a day before considering to join OPEC, either in an agreement to maintain stable production or cropping. The country told the OPEC this month that it is pumping close to 3.92 million barrels a day, although independent sources put its production at about 3.7 million barrels per day.
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