After earlier this week OPEC tabled the issue of Iran’s and Iraq’s participation in the OPEC deal until November 30, the markets might have thought there would be little jawboning left to do until that day. But not so fast.
If you ask Venezuelan President Nicolas Maduro, the OPEC deal is a near done deal, and on Wednesday, Nicolas Maduro tasked his Oil and Mining Affairs Minister, Eulogio del Pino, with traveling to Moscow to “finish” the much awaited OPEC output limit, not only with OPEC members, but non-OPEC members and Moscow.
“I have given orders to Eulogio del Pino to go to Moscow and finish the agreement with Russia, OPEC and non-OPEC countries.”
This task seems daunting at best, given that Russia has said they would freeze only after OPEC agreed internally, and Iran and Iraq have yet to climb onboard—with the latest refusals coming as late as Tuesday, although Iraq did come out on Wednesday and change the tune they’ve been singing all along—a song which foretold of their refusal to use OPEC secondary sources as a basis for freeze talks, and of their request for exemption on the grounds that they are still fighting a costly war against the Islamic State.
Yesterday’s song by Iraq’s Prime Minister Haider al-Abadi was markedly different. “What we lose in lowering production we will gain in oil revenues. Our priority is to raise the price of a barrel of crude.”
That priority, at the expense of market share, seems to be a newfound one for Iraq, in light of this comment not 24 hours prior by Iraqi Foreign Minister Ibrahim al-jafari: “It would not be fair for us to cut oil output.”
OPEC sources, according to Reuters, say the cut will now be in the realm of 4 percent or 4.5 percent, presumably based on October’s production, although that presumption has not been verified officially. Using October secondary sources provided by OPEC, assuming OPEC shoots for the low end of that range (4 percent), and counting Libya and Nigeria out, with Iran in all likelihood being allowed to hold fast at current levels, the remaining OPEC members will have to shave roughly 4.8 percent to reach an overall cut of 4 percent. This assumes Iran, Libya, and Nigeria stay at October levels and do not increase production, and Iraq agrees to actually cut. If Iraq is only asked to freeze, the remaining members will need to cut nearer 6 percent, which would mean a 600,000 million bpd cut for behemoth OPEC member Saudi Arabia.
By Julianne Geiger for Oilprice.com
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