Opec still split over deal to trim production

TEHERAN • Officials from the Organisation of Petroleum Exporting Countries (Opec) failed to bridge their differences on an agreement to cut production and revive oil prices, while Russia said it is not planning to attend crucial talks today.

With just one day left before Opec ministers meet to finalise the first decline in production in eight years, the foundations for a deal were looking increasingly shaky yesterday.

After a 10-hour meeting in Vienna on Monday, Iraq and Iran continued to express objections, according to an Opec delegate who asked not to be named due to the sensitivity of the negotiations.

A proposed deal would trim production by 1.2 million barrels a day from last month's levels, though it remains unclear whether the idea has the support needed for approval, the delegate said.

As Opec tries to resolve its own differences, the group is also asking other big producers, including Russia, to reduce output by as much as 600,000 barrels a day. The Kremlin so far has resisted requests to join the cut, offering instead to freeze production at current levels.

Energy Minister Alexander Novak said yesterday that he has no plans to visit Vienna today, but that Russia is ready to talk to Opec once the group reaches an internal consensus.

Last week, Saudi Arabia pulled out of the meeting, arguing Opec needs to sort out its internal divisions before engaging with other producers. On Sunday, Saudi oil minister Khalid Al-Falih for the first time floated the possibility of leaving Vienna without an agreement. It is unclear whether the minister changed his mind about the deal's merits, or is trying to boost his negotiating position with Iran and Iraq.

"Saudi Arabia and Iran are all playing very strong negotiation tactics," said Natixis chief energy analyst Abhishek Deshpande. "The problem for Saudi Arabia is that this isn't the 1980s and 1990s, when it could use its clout and expect others to follow. Today, members like Iran and Iraq are equally strong and their agenda is to ensure they get a large market share."

Both Iraq and Iran have resisted cutting their own production, but need an Opec deal to benefit from any increase in oil prices.

Without an Opec cut, the International Energy Agency predicts the oil market will be in surplus for a fourth year in 2017, which could cause prices to fall.

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A version of this article appeared in the print edition of The Straits Times on November 30, 2016, with the headline 'Opec still split over deal to trim production'. Print Edition | Subscribe