VIENNA, Austria”•Opec sought Wednesday to defy expectations and finalize a deal reducing its oil output for the first time in eight years, in an effort to boost painfully low crude prices.
“As I told you yesterday everyone is working very hard,” said Emirati Energy Minister Suhail al-Mazrouei before the start of talks. “I think we are looking at a very positive meeting and hopefully we will tell you the good news when we finish.”
It remained to be seen however whether the cartel’s big guns Saudi Arabia, Iraq and Iran can overcome their fierce rivalries and agree who will do most of the heavy lifting.
As Opec oil ministers went into a breakfast meeting in a plush Vienna hotel ahead of the official talks, oil prices were up slightly, recovering from losses on Tuesday and continuing their recent volatility.
In early London trade, West Texas Intermediate was up 69 cents at $45.92 per barrel while fellow benchmark Brent North Sea crude was 86 cents higher at $47.24.
If they fail to agree a deal, experts expect oil prices, at under $50 per barrel already less than half 2014 levels, to head further south perhaps to $40 or even $30.
In addition, it would deal a further blow to the already damaged credibility of the Organization of the Petroleum Exporting Countries, 56 years after its creation.
In September the cartel agreed in principle to lower production to 32.5-33.0 million barrels per day, meaning a cut of between 600,000 and 1.1 million bpd.
But finalizing the agreement has proven difficult, with Iran keen to increase oil output to pre-sanctions levels and Iraq short of money to fight Islamic State extremists.
However Iran’s Oil Minister Bijan Namdar Zanganeh was optimistic ahead of the Wednesday talks and indicated that ministers are not simply aiming to keep production at current limits.
“We are close,” said Zanganeh. “No freeze. It’s another arrangement,” he said.
Opec kingpin Saudi Arabia had already laid the groundwork for a failure by indicating on Sunday that it was prepared to leave Vienna without a deal.
Recovering demand, said Saudi Energy Minister Khaled al-Falih”•who made no comment to the waiting scrum of reporters in Vienna”•would “stabilize” prices in 2017 anyway.
The UAE’s Mazrouei echoed the Saudi argument that, with or without a deal, the market would correct itself in 2017.
A deal is still necessary, however, “to help the market recover faster than waiting six months” for the next Opec meeting, Mazrouei said.
Fawad Razaqzada, a market analyst at Forex.com, said that Iran was “playing a clever game” against its regional rival Saudi Arabia.
“They know full well that Saudi Arabia is desperate to see higher oil prices, despite the latter putting on a brave face,” Razaqzada said.
Since Opec’s 14 members produce only a third of the world’s oil, their ability to reduce the global supply glut and influence prices is limited.
But the cartel’s efforts to convince other countries, not least Russia which pumps 11 million bpd, to reduce output as well have fallen flat.
Hit hard by the low prices and Western sanctions, Moscow has said it is ready to freeze output but not to cut it.
Energy Minister Alexander Novak pulled out of an expected visit to Vienna, seeing “no need” to talk to the cartel before it reaches a deal.