‘Crude oil market will balance even without production cuts’ – Algeria proposes 1.1 mln bpd OPEC freeze: Iran

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DHAHRAN, Saudi Arabia, Nov 27, (Agencies): Saudi Arabia’s energy minister Khalid al-Falih said on Sunday that he believed the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.

Under a preliminary agreement reached in September in Algeria, the Organization of the Petroleum Exporting Countries would reduce its production to between 32.5 million and 33 million barrels per day, its first supply curb since 2008.

OPEC oil ministers meet in Vienna on Wednesday in an effort to finalise that deal; OPEC also wants non-OPEC producers such as Russia to support the intervention by curbing their output.

Falih said on Sunday Saudi Arabia was sticking to its position on the Algiers agreement that everyone should cooperate.

“We expect the level of demand to be encouraging in 2017, and the market will reach balance in 2017 even if there is no intervention by OPEC. But OPEC intervention aims to expedite this balance and the market recovery at a faster pace,” he said.

Asked whether Saudi Arabia was keeping its output high in November at around 10.6 million barrels per day, however, Falih said: “The level of demand for Saudi crude is still high and very healthy.”

“Regardless of Saudi and its market share, I think if we look at it as an indication of the health and recovery of the oil markets, it is a positive sign that makes us optimistic about the market recovery.”

“I don’t think that we have one path only in OPEC meetings, which is cutting production — I think maintaining production at current levels is justifiable, taking into consideration the recovery of consumption and growth in developing markets and the United States,” he added.

Falih, speaking to reporters at the headquarters of national oil giant Saudi Aramco, did not elaborate on Saudi Arabia’s planned production levels.

A meeting between OPEC and non-OPEC producers was originally due to be held on Monday this week, but it was called off after Saudi Arabia declined to attend; Falih said on Sunday this was because no agreement within OPEC had been reached so far.

Meanwhile, Venezuela’s oil minister will visit Algiers on Monday and then head to Moscow with his Algerian counterpart ahead of OPEC talks in Vienna, Algeria’s energy ministry said in a statement.

Algerian Energy Minister Nouredine Bouterfa has been holding discussions with OPEC and non-OPEC counterparts to try to forge consensus over a production cut proposed in Algiers in September.

OPEC member states are due to meet in Vienna on Wednesday.

Algeria has proposed that OPEC members cut 1.1 million barrels of daily oil production to boost prices, Iran’s Shana news agency reported Sunday.

Members of the Organization of the Petroleum Exporting Countries are due to meet on Wednesday in Vienna to discuss capping production.

At an informal meeting in Algiers in September, the 14 members agreed to work towards a cut of between 500,000 and one million barrels.

“The Algerian government has proposed a 1.1 million barrel per day cut in OPEC’s total output,” Energy Minister Noureddine Boutarfa said after meeting with his Iranian counterpart in Tehran.

“We are hopeful that the next OPEC meeting will save the oil market of the current crisis,” he said, according to Shana, the official news service of Iran’s oil ministry.

Boutarfa also called for non-OPEC members such as Russia to cut their output by 600,000 barrels per day (bpd) — also slightly higher than earlier proposals — saying that falling oil prices were hurting the global economy and “must be stopped”.

He said the cuts could push prices up to $60 per barrel by the end of the year.

A global supply glut has sunk oil prices below $50 — more than half their level just two years ago — threatening the economies of major producers such as Saudi Arabia.

There have been growing doubts among analysts on whether a deal could be finalised.

Iran has refused to cut production until it regains its pre-sanctions levels of output, although OPEC members agreed it could be exempted from any deal, along with Libya and Nigeria.

Iran’s Oil Minister Bijan Zanganeh said he was optimistic an agreement would be reached on Wednesday.

“The course of events and talks indicates that OPEC can reach a sustainable deal regarding its output and market management,” he said, according to Shana.

Meanwhile, Libya’s National Oil Corporation (NOC) said on Sunday it would not take part in any OPEC production cuts for the “foreseeable future” as the North African country tries to bring crude output back towards pre-conflict levels.

“Libya is in such a dangerous economic situation, there is no way it can participate in OPEC production cuts for the foreseeable future,” NOC Chairman Mustafa Sanalla told delegates at the Arab-Austrian Economic Forum in Vienna on Friday, according to an NOC statement.

Libya has more than doubled its national crude production to around 600,000 barrels per day (bpd) since several previously blockaded oil ports were reopened in September.

But output remains far below the 1.6 million bpd the country was producing before its 2011 uprising, and Libya has been rapidly depleting its foreign exchanged reserves.

Libya had already indicated its reluctance to curtail production, and this week OPEC will debate a proposal to cut production that would exempt Libya and Nigeria, another country where output has been hit by conflict.

The NOC hopes to raise production to 900,000 bpd by the end of this year and to 1.1 million bpd in 2017, but the increases depend on the lifting of a blockade at pipelines serving the western fields of El Feel and Sharara.

 

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