EMEA News
Saudi Arabia May Freeze Output After All: OPEC Delegate
If remarks made by a senior delegate to the Organization of the Petroleum Exporting Countries (OPEC) prove true, the impending member/non-member talks to curtail oil output could be more substantive than critics believe.
The unnamed delegate gave strong indications that Saudi Arabia may join the proposed production freeze without Iran's participation: "There is agreement from many countries to go along with a freeze; why make it contingent on Iran?"
This contradicts earlier remarks made by OPEC Gulf officials, who said any freeze depended on Iran joining the initiative with other major producing countries.
The delegate suggested that Saudi's presumed about-face was influenced by Iran's questionable ability to increase its output to 4 million barrels per day, a threshold it says it must reach before considering any production cuts: "Despite all the bragging, we have yet to see what Iran can do."
Additionally, the delegate noted that Russia is "taking a leading role" in reaching out to OPEC producers and that its relations with Saudi Arabia has improved.
While Saudi's participation in the freeze would not in and of itself make much impact on supply and demand balances because many OPEC members are producing at near record levels, the delegate argues that the prospect of a freeze alone has boosted prices and helped reverse negative market sentiment: "Look at what it did to change the psyche of the market.
"Now the market can see people are gathering, people are communicating; this collaborative element has helped the price."
Moreover, he thinks Saudi's co-operation might lead to bigger initiatives down the road: "We'll see who did what in January, February and March, then maybe we can find numbers that add more credence in the marketplace."
As hopeful as the delegate may be, critics weary of the publicity surrounding the proposed freeze argue that it isn't having a major impact on prices: Fatih Birol, executive director for the International Energy Agency, says that declines in U.S. shale output are contributing more to the rise in oil prices than talks, and that if a freeze was agreed upon "it would be unexpected that it would have major implications, at least in the first half of 2016."
