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Next week, the oil organization will be meeting to decide on what to do about the current high production level of more than 33.6 million barrels per day. Will they agree to freeze or reduce production? More specifically, will they succeed or will the pattern of Doha and Algeria failures this year continue?
Undoubtedly, Saudi Arabia, Kuwait, the United Arab Emirates and Qatar are genuinely committed to the reduction or freezing of production along with Russia. However, what about the rest of the OPEC members? Will they, particularly Iran and Iraq, maintain their last-minute change of position?
Earlier this year in February, all members had agreed to freeze their oil production but then the Iranian oil minister changed his mind and did not attend the meeting. Last September, they had all agreed to freeze and reduce oil production but then in October, OPEC shocked the industry with its highest throughput of more than 36.6 million barrels, contrary to all their talks and media interviews. This is the main reason why the Russian energy minister is insisting that Russia will not commit to any freeze or reduction without seeing the signatures of all OPEC members, affirming that there will be no commitment from its part otherwise.
Meanwhile, most of the 109 international oil companies have reduced their production by more than 800,000 barrels from its peak of 33 million barrels last year due to the weak oil prices, including shale oil production.
It is hard to predict the outcome of the Nov 30 meeting, as the recent record of the oil organization was not very helpful in reaching a unanimous accord among the 14 members of OPEC, especially with political disagreement being the main driving factor against reaching any sort of agreement. Without all the signatures on the agreement, Russia will not abide by its previous commitments to any freeze or reduction of production.
Therefore, Vienna is the avenue where the oil market coming Wednesday could witness a break through the outcome of OPEC and possibly see the oil prices either rise firmly or decline sharply. The choice is theirs.
By Kamel Al-Harami
Independent Oil Analyst