EMEA News
Price Target Not a Consideration In Six-Month Output Cap Deal: OPEC
Even though price was assumed to be a major component of any deal to curb oil production, Organization of the Petroleum Exporting Countries (OPEC) who agreed to cap output in Algeria came away from this week's World Energy Congress in Istanbul stating that they are not interested in targeting a specific price for oil – and that their cap would last for a sixth month period only.
As unsettling as this disclosure may be to critics, Khalid al-Falih, energy minister for Saudi Arabia, told Reuters that the next step is to meet with non OPEC members on Wednesday: "I can say that many countries from outside OPEC are willing to join ... we are not talking about support, we are talking about contribution."
Reportedly, Russia, Azerbaijan, possibly Mexico, and other nations will attend today's event, to be held on the sidelines of the World Energy Congress.
Meanwhile, Mohammad Barkindo, secretary general for OPEC, affected a self-congratulatory tone with the press by stating, "I think we have restored the broad consensus among oil producers and I'm glad that this consensus we have got major consuming countries also on board.
"We have turned the wheel going forward."
In explaining that he and his colleagues are in the process "of putting up these building blocks post Algiers, hopefully to Vienna," Barkindo explained that a specific oil price target is not a consideration "Because this current cycle unlike the previous five cycles is driven by supply fundamentals."
He added that in order to restore stability on a sustainable basis, oil producers need to address the current overhang issue before a fair price can be achieved.
Assuming Wednesday's meeting goes as planned, the cap deal will then be applied over six months and reviewed - which disappoints Eulogio Del Pino, petroleum minister for Venezuela: he told reporters he preferred a full-year deal because it would include peak output periods of different oil producers.
The post Algeria disclosures made by nations who have supposedly committed to cutting production prompted Naeem Aslam, chief market analyst at ThinkMarkets U.K. Ltd., to remark earlier this week, "If history tells us anything, it is that these major oil players also have the habit to not respect the agreed agreement."
