Oil Coalition Seeks Consensus Ahead of Algiers Summit

Oil Coalition Seeks Consensus Ahead of Algiers SummitOil Coalition Seeks Consensus Ahead of Algiers Summit

With a critical meeting in Algiers fast approaching, a fractured OPEC and its allies are still searching for consensus on how members with spare output capacity can equitably distribute the extra barrels they intend to pump without upsetting those unable to produce more.

According to S&P Global Platts, the Saudi and Russian energy ministers met over the weekend to align their positions, while delegates on a six-country technical committee are scheduled to hold a conference call Sept. 24 to mull various proposals.

Iran's OPEC Governor Hossein Kazempour Ardebili said Saudi Arabia and Russia are in cahoots with the US to undermine other OPEC members and destabilize the oil market.

The posturing comes ahead of the Sept. 23 summit of the OPEC/non-OPEC Monitoring Committee in the Algerian capital, Algiers, which reportedly will be attended by ministers from almost the entire 24-country producer coalition.

There, the group aims to reveal a production policy that can calm market fears of tight supplies in the months ahead, while remaining nimble enough to prevent a glut if global demand proves softer than expected.

The coalition on June 23 agreed to raise output by 1 million barrels per day, but left unsettled how that will be allocated, with Iran insisting that members stick to individual quotas and Saudi Arabia saying the deal involves a collective production ceiling.

"As things stand, the overriding theme across the oil market is one of uncertainty," said Stephen Brannock, an analyst with brokerage PVM Oil Associates.

"Market players are bracing for the full impact of US sanctions on Iran's export capabilities and the full extent of Venezuela's downward spiral. Add in a sprinkling of downside risks on the demand side of the oil equation and you have all the ingredients for price fireworks."

S&P Global Platts Analytics expects 1.4 million barrels per day of Iranian oil supplies to leave the market by November, when the US sanctions come into force.

Venezuela, which pumped 1.22 million b/d in August, according to the latest Platts survey of OPEC production, could see output fall to 1 million b/d in 2019, Platts Analytics forecasts. Politically unstable Libya also presents a supply risk.

On the demand side, Platts Analytics sees a negligible impact from the US-China trade dispute, though OPEC's own analysis arm has projected a contraction of some 350,000 b/d in global consumption in a worst-case scenario of ratcheting tariffs.

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