OPEC Production Deal Fails

Weekend negotiations between major oil producers around an output cut ended in a stalemate Saturday, threatening last month’s historic deal that vowed to drain the global supply glut of crude. The Organization of the Petroleum Exporting Countries (OPEC) and other major producers met in Vienna last weekend to pave the way for a detailed plan to lower oil output and support prices. The meeting came one month after OPEC reached an accord to lower crude production by up to 700,000 barrels per day.

More than 18 hours of talks over two days in Vienna yielded little more than a promise that the world’s largest oil producers would keep on talking. Discussions will continue in late November, just days before the Organization of Petroleum Exporting Countries is supposed to finalize the accord that lifted oil prices to one-year highs.

Most recently, Iraq insisted on Sunday that it should be exempt from any OPEC cuts that were being discussed on the grounds that it needed to maintain production while it continued its fight against Islamic State. At the time, Iraq had scared the markets, not by refusing to take part in OPEC cuts that are said to be finalized on November 30, but by mentioning that it should be producing some 9 million barrels per day were it not for the war, pointing out that other countries had taken a chunk of its previously held market share. But Iraq showed its displeasure at the deal all the way back in late September, when it began to question the method in which OPEC calculated production figures—production figures that would be used to determine who would cut what.

Money managers increased bets on lower West Texas Intermediate oil for the first time in five weeks as Iraq joined Iran, Nigeria and Libya in seeking to be excluded from OPEC’s first agreement to reduce output in eight years. The deal was reached in Algiers on Sept. 28 and sent futures climbing.

Brazil’s Oil and Gas Secretary Marcio Felix after the meeting said; “Brazil will not restrict its oil production, though it is willing as early as next year to host future Opec conferences with the world’s biggest producers”, he said in a phone interview.

Russia, the largest producer outside OPEC, was also present at the meeting, where it reiterated its commitment to freeze production. However, Russia said it wouldn’t lower output until OPEC members can agree internally on a production strategy.

Oman is willing to cut production as part of deal with other producers, but is waiting for OPEC to reach an internal agreement before deciding on the size of its own supply reduction, said Ali Al Riyami, the nation’s representative at the meeting in Vienna.

OPEC secretary general Mohammed Barkindo said the consequences would be dire if major producers don’t follow through on last month’s agreement in Algeria.

“Anything short of implementation of this accord could lead to the elongation of the rebalancing process, with further deterioration of financial conditions and setbacks in investments extending into a third year, which would be unprecedented,” Barkindo said, according to OPEC’s official website. “We should be calling for maximum commitment from all OPEC and non-OPEC countries”.