Saudi Arabia has reportedly announced that it is ready to reduce its oil production provided that Iran agrees to cap its own output over the remaining months to the end of 2016.
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Here’s a closer look at why the price of crude oil today is higher…
Crude Oil prices, on Friday, fell sharply after the oil producing giant Saudi Arabia, a leading member of Organization of the Petroleum Exporting Countries (OPEC), indicated that the upcoming talks between OPEC members in Algeria wouldn’t bear any fruitful results and it is very unlikely that an agreement would be reached.
“Thus, we recommend paying less attention to Algiers and more attention to a naturally tightening oil market balance that precludes the group from having to make any hard decisions”. We think a freeze will help if it is agreed.
“Every state in the organisation agrees on the need to stabilise prices, it just remains for us to find a format that pleases everyone”. At any rate, investors and analysts are not holding onto hopes that there will be any freeze this week.
“Rather, we expect OPEC to note how this meeting lays the foundation for a more constructive and formal discussion at the official November OPEC meeting”, the bank added.
Hosted by the Government of Algeria, the meeting from September 26 to 28 will gather ministers, senior officials, chief executive officers, Global organizations, and experts from the 72 member countries of the IEF.
Russian Federation will be in attendance.
OPEC member Iran, attending the ongoing NAM summit, has been ramping up production to its pre-sanctions levels despite the recent supply glut.
Oil prices have been hammered by a stubborn supply glut since late 2014. Saudi Arabia’s reported offer to cut production to January levels has contributed to the rally, RT reports. Crude prices LCOc1 recovered on Monday in volatile trade.
Algerian Energy Minister Noureddine Bouterfa expressed optimism in an interview with Reuters Tuesday that some kind of deal could be worked out next week.
One of the best gauges of how oil prices will move is “implied volatility”.
The production decline dragged Saudi Arabia’s production down to about 10.63 million bpd last month. However, Iran seems determined to reach the 4 million bpd level.
Iranian agency SHANA quoted the country’s oil minister, Bijan Zanganeh, as saying the meeting in Algiers was only “advisory” and expectations should be modest.
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OPEC members gather in Algiers for the International Energy Forum starting Monday and are expected to hold informal talks following the two-day event.
