OPEC's oil production cut will cap its total production at 32.5 million barrels per day in order to balance the oil market, Saudi Arabia's oil minister Khalid al-Falih said on Thursday, thus clarifying what everyone has been wondering for months.
The cartel will now look to set the limit at the bottom end of the band, which was originally proposed to be between 32.5 million bpd and 33 million bpd.
The ceiling of 32.5 million bpd-as opposed to OPEC's current production, would speed up the recovery-although it may still be a slow climb as far as easing the glut.
According to Saudi Arabia, the figure disclosed today would be beneficial to producers and consumers.
The lower end of the initially set range, however, now means that OPEC must cut more than 1 million bpd if it wants to fit in that ceiling. OPEC's production was 33.64 million bpd last month-a new record, according to OPEC secondary sources. This could potentially burden OPEC members with even deeper cuts than many had hoped for.
"I'm still optimistic that the consensus reached in Algeria for capping production will translate, God willing, into caps on states' levels and fair and balanced cuts among countries," Al-Falih told Saudi-owned Al-Arabiya TV, as quoted by Reuters.
Al-Falih is currently trying to push Saudi Arabia's agenda for the OPEC output deal after the Saudis have reportedly laid out their four demands for clinching an agreement: all members must agree to collective action, each member must share the burden of the cuts equally, OPEC-reported production figures must used as reference for freezes/cuts, and Iraq-who has balked at the idea-would cut its output along with the others. Related: Are The Saudis About To Reveal The Best Kept Secret In Oil?
This week Al-Falih is said to be heading to Qatar for informal meetings with some fellow OPEC members on the sidelines of the Gas Exporting Countries Forum (GECF). The Saudi minister is expected to meet other OPEC ministers, and maybe his Russian counterpart Alexander Novak.
This could be one of the last opportunities to narrow the gaps in positions of OPEC producers before the technical committee meeting on Monday, November 21. The biggest differences, as always, are among the largest OPEC members: the Saudis, Iran and Iraq. This week Iran and Iraq have opted out of sending their oil ministers to the gas forum, so Saudi Arabia's Al-Falih must find other ways to talks to Iranians and Iraqis.
Russia's Novak estimates that there are big chances that the cartel will hammer out the details of the freeze by the November 30 meeting in Vienna.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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