LONDON – Oil prices dropped today (Oct. 24) upon news that Iraq does not wish to be included in OPEC’s planned production freeze, Reuters has reported. However, these losses are said to be capped by Iran’s pledge to encourage other members to join the output stoppage.
The news service said that Brent crude futures were down 45 cents to $51.33/bbl, with West Texas Intermediate (WTI) down even further: 61 cents to $50.23/bbl.
“Iraqi oil minister Jabar Ali al-Luaibi said Baghdad wants to be exempt from any production cut the Organization of the Petroleum Exporting Countries [OPEC] is aiming to achieve,” Reuters reported today.
“Falah al-Amiri, head of Iraqi state oil marketer SOMO, added that Iraq’s market share had been compromised by the wars it has fought since the 1980s. ‘We should be producing 9 million (barrels per day) if it wasn’t for the wars,’” he was quoted as saying in the report.
OPEC decided in its September meeting in Algiers to curb production, reportedly the first time since 2008. It agreed to limit production to between 32.5-33 MMb/d, and said that individual country levels and other details would be ironed out at its November meeting in Vienna.
Bloomberg reported that Russia, although not a member, still the “biggest prize in OPEC’s quest for support,” still has not committed to join the plan.
“Russia can’t say yet whether it will freeze or cut output as part of a final accord and is reviewing ‘many scenarios’ to speed the oil market’s recovery, Energy Minister Alexander Novak said after talks with Gulf Arab counterparts in Riyadh,” Bloomberg wrote.
“‘We see reasons to take steps to balance the market in coming months to bring investments back and reduce volatility,’” Novak said to the news agency. “‘We discussed issues related to levels of limiting oil production by Russia and by other countries that may join the agreement, but it’s too early to tell the concrete figures because the process of finalizing positions is going on.’
“Like Iraq, Russia is seeking to ramp up output, not tamp it down.”
However, the news was not entirely negative. Reuters also reported that Novak told a Russian news service that “he was confident an agreement between Russia and leading oil exporters on oil market stabilization would be eventually reached.”
A similar sentiment from Iran’s deputy oil minister Amir Hossein Zamaninia also helped to push prices higher. Reuters reported that “[h]e said Tehran would encourage other OPEC members to join an output freeze, adding that $55-$60/bbl is a fair price to bring stability to the market.
“Analysts said that oil markets, which have been dogged by two years of oversupply, might be rebalancing in terms of production and consumption.
“‘The market moved into a small deficit in Q3, will remain so in Q4 and then the deficit will expand significantly in 2017,’” Barclays bank said in a note to clients.