There is a good chance that OPEC will revive talks on freezing oil output levels when it meets non-OPEC nations next month. A previous attempt to freeze output at January levels collapsed in April. OPEC members will meet between Sept. 26-28 during the International Energy Forum (IEF) in Algeria.
According to OPEC sources, top exporter Saudi Arabia appears to want higher prices. Oil prices collapsed from as high as $115 in mid-2014 to $27 per barrel in January. The price collapse hit Saudi Arabia’s budget hard, resulting in a record fiscal deficit. Energy Minister Khalid al-Falih said on Thursday that Saudi Arabia will work with OPEC and non-OPEC members to help stabilize oil markets.
Saudi Arabia has been raising output since 2014 to drive higher cost producers out of the market. Output has soared in the United States to capitalize on the high price of oil over the past decade.
Over the past six months, Saudi Arabia increased its oil output to 10.67 million barrels per day from 10.2 million. Saudi Arabia explained that the increase was due to rising seasonal domestic demand and increased requests from customers worldwide.
Speculation that informal OPEC talks in September could result in joint actions to prop up prices led to a rebound in oil prices last week. In its biggest weekly advance since April, West Texas Intermediate crude climbed 6.4 percent last week.
Iran, Iraq and Russia present obstacles to a deal. Iran is expected to oppose any output freeze.
Iran, OPEC’s third biggest producer, says that it needs to regain market share lost during years of Western sanctions.
Iran has boosted output close to pre-sanctions levels over the past few months. Iranian oil minister Bijan Zanganeh intends to take the country’s output to 4.6 million bpd within 5 years, according to statements he made in parliament last week.
Iraq, OPEC’s second largest producer, has agreed to new contract terms that would allow output to rise by up to 350,000 bpd next year. Russia has also signaled it would continue boosting output, but is open for talks on freezing output to stabilize the market. Energy Minister Alexander Novak said Russia is consulting with Saudi Arabia and other producers on ways to improve oil market stability.
Several OPEC members are currently pumping well below capacity. This year, attacks on Nigeria’s oil sites reduced the country’s output to its lowest level in over two decades. Turmoil in Libya has led to it also operating at reduced output. Several non-OPEC producers, including North American producers, are also expected to add more barrels to the supply.