This week's OPEC meeting is expected to finalize a production-cut agreement made in September. Preliminary talks on Monday signaled that the deal may fall through.
Chances of reaching a deal to cut oil production are looking slimmer for the Organization of Petroleum Exporting Countries (OPEC) ahead of its Wednesday meeting in Vienna. With Iran and Iraq resisting output cuts in preliminary talks on Monday, analysts fear a failed deal could make global oil prices tumble.
OPEC member countries, facing a price collapse since 2014, had outlined an agreement to cut oil production to about 32.5 to 33 million barrels per day, down from the current average of 33.64. Championed by OPEC's unofficial leader Saudi Arabia, the plan will be discussed at the Wednesday meeting.
Iran and Iraq have their own reasons for pushing back against the cap.
Iran, which had not agreed to reduce its production in September - a major concession for Saudi Arabia - is arguing that it wants to increase production. Iran feels that it had lost market share under Western sanctions while the Saudis increased output, and now hopes to regain ground.
Iraq says it will agree to output limits on Wednesday, but is nevertheless pressing for this limit to be set higher. The war-torn country argues it needs money from oil sales to fight the militant group "Islamic State."
Effect on prices
Despite doubts of a reduction deal, Saudi Energy Minister Khalid al-Falih expressed confidence over the weekend that the market would rebalance itself in the long run. "We can also depend on recovery in consumption, especially from the US," he told Saudi media.
Investment banks Morgan Stanley and Goldman Sachs, however, voiced concerns that crude oil prices could take a hit if the deal fails, and that the market could face a deficit by late 2017.
Russia, which is not a member of the cartel, has also caused problems for OPEC's mission to cut production. Oil ministers from OPEC nations Algeria and Venezuela were due in Moscow on Tuesday to persuade the Russians to cut production, which reached a new high this past year.
A global collapse in oil prices began in 2014 when the price of a barrel of crude oil dropped from about $100 (95 euros) to $30 by the beginning of 2016. Although the market has made a modest comeback - prices currently stand around 47 USD per barrel - oil exporting nations still have much to gain by bringing prices back up to pre-collapse levels.
ae/kms (Reuters, AFP)