A few days before the highly anticipated OPEC meeting in Algeria, a top official from the group threw cold water on the possibility of a production freeze.
Expectations for a deal have gone up and down since they were first floated in August, taking oil prices on a volatile ride. Rumors of a possible deal were enough to spark a 20 percent rally in oil prices in August, ending what had become a bear market. Since then, a cavalcade of comments, opinions, and seemingly off the cuff remarks from OPEC officials and oil ministers have fueled market speculation about the possibility of a production freeze.
But the latest comment from OPEC’s Secretary-General is arguably the most definitive to date, and it doesn’t bode well for a production freeze in Algiers. Secretary-General Mohammed Barkindo said over the weekend that the group wouldn’t be making a decision on any limits. “It is an informal meeting, it is not a decision-making meeting,” Barkindo said to Algerian state media.
On the other hand, Venezuelan President Nicolas Maduro said that they were closing in on a deal, which could be announced before the end of the month. "We had a long bilateral meeting with Rouhani. We're close to a deal between OPEC producer countries and non-OPEC," Maduro said at a news conference, referring to a meeting with Iranian President Hassan Rouhani on the sidelines of a summit in Venezuela for the Non-Aligned Movement. Related: What Hubbert Got Wrong About Peak Oil
Venezuela is one of the countries that is most desperate for a deal, so those comments should be taken with a large dose of skepticism.
At the same time, the comments from OPEC’s Secretary-General should also not be taken at face value. Damping down speculation could be a calculated move, lowering expectations for whatever might come from the Algeria meeting.
Nevertheless, if an agreement is to be reached, the most likely scenario is that OPEC and non-OPEC participants agree to some sort of consensus about capping output, but a formal agreement would only come from some future meeting, not from the upcoming gathering in Algeria.
By Charles Kennedy of Oilprice.com
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