Tuesday 22 June 2021

Saudis soften oil stance; Opec deal likely in Nov

ALGIERS, September 28, 2016

Opec might still agree an oil output-limiting deal later this year after failing to do so in Algeria this week as the group's de-facto leader Saudi Arabia softens its stance towards Iran.

Saudi Energy Minister Khalid al-Falih said on Tuesday Iran, Nigeria and Libya would be allowed to produce "at maximum levels that make sense" as part of any output limits which could be set as early as the next Opec meeting in November.

That represents a strategy shift for Riyadh, which has previously said it would reduce output only if every other Opec and non-Opec producer followed suit. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions.

The Saudi and Iranian economies depend heavily on oil but in a post-sanctions environment, Iran is suffering less pressure from the halving in crude prices since 2014.

Riyadh, on the other hand, faces a second year of record budget deficits and is being forced to cut the salaries of government employees.

"Does the salary cut indicate the Saudis are ready for a fight or does it indicate that they are ready for a deal," said an Opec source from a Middle Eastern producer, when asked about the Saudi shift.

Saudi Arabia is by far the largest Opec producer with output of more than 10.7 million barrels per day (bpd), on par with Russia and the United States. Together, the three largest global producers extract a third of the world's oil.

Iran's production has been stagnant at 3.6 million bpd in the past three months, close to pre-sanctions levels although Tehran says it wants to ramp up output to more than 4 million bpd when foreign investments in its fields kick in.

"Iran is not losing as much as Saudi. They are in a stronger position," an Opec source travelling to Algeria this week said when asked about the shifting dynamic within Opec.

The Organization of the Petroleum Exporting Countries will hold informal talks at 1400 GMT on Wednesday followed by a formal, regular meeting on Nov. 30.

Tags: Saudi Arabia | Iran | Algiers | Opec deal |

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