David Fuller's view -
OPEC’s final push to implement the Algiers supply accord and boost oil prices shifted focus to Iran and non-members such as Russia as Iraq appeared to reverse its opposition to output cuts.
The extension of shuttle diplomacy -- including a visit to Tehran from an architect of the September agreement and an unusual Vienna breakfast with non-OPEC ministers -- comes after an OPEC committee failed this week to hammer out details of how producers will share the burden of cuts. With less than a week until the crucial Vienna ministerial meeting, the refusal of just one major producer to participate could scuttle the whole deal.
Algeria’s Energy Minister Noureddine Boutarfa will travel to Tehran on Saturday in an effort to bring a deal closer, said a person familiar with the matter, who asked not to be identified because the information isn’t public. Algeria is the ninth-largest producer in OPEC and has limited international clout, but in September played a central role in clinching the preliminary agreement on output cuts that had eluded its more formidable counterparts throughout the two-year oil slump.
Boutarfa will also meet his Iraqi counterpart in Vienna on Nov. 28 or 29, although that country is now less of a problem after positive statements from Baghdad, the person said.
Oil prices rose Wednesday as Iraqi Prime Minister Haider Al-Abadi said his country would shoulder part of the burden of output cuts. That assertion still leaves unresolved the significant issue of exactly how much the country would reduce, and from what level, said a Gulf OPEC delegate. Iraq has been disputing the OPEC supply estimates that would form the basis of cuts, saying they underestimate its production.
What a humiliating experience these negotiations must be for OPEC’s main participants, not that they will receive much sympathy. Nevertheless, frackers in the USA will regard any success by OPEC plus Russia in cutting oil supplies as an early Christmas present, and with good reason. Any price rise above $50 will increase their profits and also production. Additionally, it will enable them to lock in higher prices for the future by hedge shorting more distant contracts in this contango market. Jan ’17 Brent crude currently sells at $49, with prices rising gradually over the next 12 months. The most liquid distant contract is Dec ’17, which closed today at $53.71.
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