Published: Wed, November 30, 2016
Economy | By Melissa Porter

Iran, Iraq at loggerheads with Saudis ahead of OPEC meeting

The delayed Saudi arrival comes after energy minister Al-Falih hinted on Sunday in Dhahran that OPEC doesn't necessarily need to cut output; a comment viewed by analysts as a bargaining position that could result in a price crash if no deal is reached.

LAUNCESTON, Australia Nov 29 Saudi Arabia's problems run far deeper than trying to cobble together a deal with fellow OPEC members to curb crude oil output in order to bolster prices.

Reuters reported that Brent crude futures were trading at US$47.69 per barrel at 0741 GMT, down 55 cents or 1.14% from their last close.

Iran's Oil Minister Bijan Zangeneh said the country will not cut oil production.

Oil ministers from OPEC members Algeria and Venezuela were due in Moscow on Tuesday in a final attempt to persuade non-OPEC Russia to take part in cuts instead of merely freezing output, which has reached new highs in the past year.

Saudi Arabia is casting doubt on an informal OPEC agreement that aims to shave as much as a million barrels a day of crude from current production.

OPEC sources told Reuters a meeting of experts in Vienna on Monday failed to bridge differences between Saudi Arabia, and the group's second and third largest producers over the mechanics of output cuts.

Iraq meanwhile has said it will cut output but that it is short of money needed to fight Islamic State extremists.

The oil market "is treading into some unsafe waters" by ignoring the strength of the dollar and high inventories, said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis.

Although exact figures are hard to discern, OPEC's dwindling dominance is reflected in its share of global production dropping from 54 percent in 1973, according to the Middle East Research and Information Project, to 42 percent today, according to Statista. The argument between Iraq and Saudi Arabia mainly focuses on whether Baghdad should use its own output estimates to limit production or rely on lower figures from OPEC's experts.

"Although it might be true that (crude oil) markets will rebalance in 2017 whether a production cut is reached or not, oil bears are just waiting for a signal to push the sell button, and 15% decline towards US$40 (about RM178) looks very reasonable in case no significant deal was reached", FXTM chief market strategist Hussein Sayed wrote in a note today. He had previously said Riyadh was keen for a deal. The minister is expected in Vienna later on Tuesday.

On the demand side, South Korea's crude imports rose 3.9 percent in the third quarter of 2016 from a year earlier, as oil consumption climbed thanks to low oil prices. The cartel offered Iran a compromise to cap output at current production of around 3.6-3.7 million bpd.

News of the tensions has sent the price of oil - which is notoriously jittery when it comes to news from OPEC - tumbling on Tuesday.

They made no comment as they emerged from their meeting. Russian Energy Minister Alexander Novak said he had no plan to travel to Vienna but could meet OPEC once it reaches a deal.

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