News // Middle East and OPEC
OPEC’s former Head said «conditions are set» for oil freeze
18 August 2016 , 16:20Neftegaz.RU534
Chakib Khelil told on August 17, 2016, that «conditions are set for an agreement», referring to OPEC’s desire to solidify an output-freeze in the wake of the oil glut.
The former Head of the OPEC explained to Bloomberg TV that «Probably this is the time because most of the big countries like Russia, Iran, Iraq, and Saudi Arabia are reaching their top production level: they have gained all the market share they could gain.» Khelil pointed out that even though a deal would not influence a market rebalance substantially, it would have a psychological benefit in terms of improving market sentiment.
But to say the signals being sent by concerned parties in advance of the Algeria meeting are mixed would be an understatement: sources in Saudi Arabia, for example, are claiming the kingdom could boost its output in August to a new record level of as much as 10.9 million bpd and overtake Russia, which is the world's top producer.
This prompted Olivier Jakob, managing director of Petromatrix, to write in a note, «It would therefore be a very hard sell for Saudi Arabia to have other countries join a collective action plan, while it is the main source of supply increase - outside of Iran post sanctions.»
Edward Bell, director, commodities markets, for Emirates NBD noted that countries such as Nigeria «would not be in a position to countenance any kind of production cuts, as they are trying as hard as they can to raise production in the face of militant attacks.»
And even if a deal was miraculously reached, Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors, pointed out that with Saudi production and «the U.S. rig count coming back online for several weeks, even if a freeze did happen we would be talking about freezing at higher levels of output.»
While oil prices have advanced since OPEC announced it would hold informal talks in the Algerian capital next month, analysts from UBS Group AG to Commerzbank AG doubt any freeze deal will be completed, and comments from Saudi Arabia and Nigeria have kept expectations low. Talks collapsed in April as Saudi Arabia insisted Iran would have to limit its production, a condition the country rejected as it ramped up exports previously curbed by sanctions.
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