The world's eyes are on the informal OPEC (Organization of the Petroleum Exporting Countries) meeting taking place today in Algiers. At the summit's centre lies the pressing matter of the possible reduction of oil production in order to raise prices once more. Now all the biggest oil producers agree that such low prices are no longer sustainable, for either companies or state balance sheets. The world has now been invaded by surplus oil barrels, with countries like Saudi Arabia, Russia and Iran that, in order to avoid losing market shares after Tehran's return as an exporting country, have begun to produce at full working capacity once more. Riyadh is producing 10.7 million barrels a day, Iran has increased by 800,000 barrels since the end of the sanctions and would like to increase by a further 10%. As regards the concrete possibility of an agreement, the Algerian minister of Energy, Noureddine Boutarfa, underlined today how there is a "common desire" for the organisation's countries to come to an agreement. "If we reach an agreement – he added - that will be excellent, and if we reach some points of agreement, that will be good to, because at the moment we have nothing to influence the (price) trend." In other words, it would be sufficient to lay the base for a later, more structured agreement.
The Doha example and Riyadh-Tehran rivalry
The first summit last April in Doha ended without an agreement being reached since Iran and Saudi Arabia maintained different, distant positions. From that moment the painstaking diplomatic work aimed at a reconciliation with a view to an agreement which - if not reached over the next few days - could be reached at the next official OPEC meeting. According to several analysts, the Algiers meeting may not result in a shared agreement but this could be a chance to lay the foundations of a later update. Saudi Arabia and Iran met over the past days at the OPEC headquarters in Vienna to prepare for the Algiers meeting. This was an important step for the two countries that are bitter enemies also and above all as regards energy. According to some sources, Riyadh has offered Tehran an agreement where Saudi Arabia would be committed to limiting its production, at the same time, asking Iran to halt extraction. The difficulties, thus, seem to have the same profiles.
Saudi Arabia willing to freeze production
Saudi Arabia has said it is willing to return to last January's production levels, thus limiting its oil extractions. Algerian Minister of Energy, Boutarfa, confirmed, explaining how Riyadh intends "to do its utmost for the meeting's success" and is "ready for anything, from freezing to production reduction". The Algerian minister then underlined how OPEC's decision to meet, although at an "informal" meeting, shows awareness and the producing countries' attention to the situation. Since last June - continued the minister – the context has worsened and so we need to understand what decisions to take in the short and very short term". One of the key countries, Russia, explained how an agreement between the parties to stabilise the oil market would not be considered a "critical" matter, quite the opposite. Venezuela is of the same idea and is optimistic regarding an agreement.
But it may all be postponed to November
And while the intentions of the producing countries are some of the best, on a international level oil price operations lead us to believe that an immediate price rise is not really credible. A key role, then they'll play with the reserves, those of The United States to begin with. Even the slightest increase entails a barrel price reduction. Despite the declarations of intent and meetings, the Algiers meeting will probably not announce any agreement which could instead be formalised during the next official meeting at the OPEC headquarters in Vienna, set for this 30 November.