OPEC’s self-imposed deadline for a plan to reduce the group’s combined oil output by about 830,000 bpd is almost upon us. On November 30, representatives of the 14 countries will assemble at OPEC headquarters in Vienna where, ideally, they will rubber stamp an agreement that has been painstakingly negotiated over the past two months.
The problem is that members are still at odds over where these barrels will come from. In order for the group to reach a consensus, some members will have to cut and most will have to freeze. Despite multiple sub-committee meetings throughout October and November, as well as individual meetings between OPEC’s Secretary General and various other countries, the important issues remain unresolved.
Iran: OPEC has previously agreed to grant a production limit exemption to Iran, meaning Iran will be able to increase it production slightly. However, the final limit is still in dispute over about .08 mbpd. Iran is also concerned about the possibility of renewed sanctions with the arrival of a new American administration.
Iraq: This country has also asked for an exemption but OPEC has refused, despite Iraq’s political and internal military struggles. Currently, Iraq is arguing that it produces 4.776 mbpd and that this should be its production limit in a freeze (barring an exemption). OPEC wants to set Iraq’s limit as 0.17 mbpd lower.
Saudi Arabia: Saudi Arabia has indicated it is open to cutting oil production. However, this impacts Saudi production less than one would expect because the country never reduced production from summer highs as is typical. Likely Saudi Arabia is looking to pass off its regular seasonal reduction as a concession to OPEC, but will not be willing to do so unless Iran and Iraq agree to freeze or cut their oil production as well.
OPEC’s High-Level Committee meeting in Vienna this week is intended to result in production recommendations that OPEC oil ministers will adopt (or not) at the regular meeting on November 30. At that point, OPEC will begin discussions with non-OPEC players like Russia and Brazil.
For live updates from OPEC on November 30 follow me on twitter @EnergzdEconomy