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Iran remains optimistic Opec deal can be reached

27 Nov 2016 07:50 GMT
Iran remains optimistic Opec deal can be reached

Vienna, 27 November (Argus) — Iran's oil minister Bijan Namdar Zanganeh remains hopeful that Opec will manage to finalise an agreement to cut production when its ministers meet in Vienna on 30 November, despite persistent disagreements between Opec members on several key issues.

"The general situation and [all of the] talks that have taken place show that Opec can reach a lasting agreement on its own production, and on market management," Zanganeh said following talks with his Algerian counterpart Noureddine Boutarfa in Tehran on 26 November.

Boutarfa was in Tehran as part of his attempts to broker a final deal to limit the 14-member exporter group's production. Opec reached a framework agreement in Algiers in late-September aimed at supporting oil prices and speeding up the rebalancing of global oil supply and demand.

In Tehran, Boutarfa presented "a proposal to allocate production levels to each [Opec member] country," Zanganeh said, which Iran will now "carefully review and analyse."

Boutarfa said Algeria's proposal called for Opec member countries to collectively cut their output by 1.1mn b/d, and non-Opec countries by around 600,000 b/d, in order to "stop the fall in oil prices which has caused a lot of damage in the global economy."

Zanganeh said Iran would share its views on the proposal at the upcoming 30 November meeting, but said he remained "optimistic of an agreement by Opec members." If members manage to reach an agreement, "I am optimistic prices will rise — what the global economy has been seeking," he said.

Boutarfa said an agreement could translate into oil prices of about $50-55/bl, rising to $60/bl by the end of next year, but failure to agree would likely result in prices of "below $35/bl."

Front-month Ice Brent futures closed at just above $47/bl on 25 November, close to 60pc lower than the level seen in the middle of 2014.

But Boutarfa's visit to Tehran came just one day after a planned meeting between Opec and some non-Opec countries in Vienna on 28 November was scrapped until Opec members can first agree the terms of their own output cut.

"There is no point in having a meeting with non-Opec countries [yet], because we cannot really ask non-Opec countries to participate in a cut before we in Opec agree on one," an Opec delegate told Argus on 26 November.

Opec members are seeking buy-in from non-Opec producers in order to further expedite the market rebalancing process.

There are two key obstacles to a deal, the Opec delegate said. Iran is still rebuilding its production after it was freed of sanctions in January and thus refuses to cut or freeze its output. And Iraq is not ready to accept the use of secondary source figures, which it feels underestimates Iraqi production.