OPEC Production Deal Is Most Probable

Iranian Oil Minister Bijan Namdar Zanganeh said he’s optimistic that OPEC members will agree to proposed production cuts at a meeting in Vienna later this month.

The group—which controls over a third of global oil production—agreed in September to reduce output to help draw down a glut of supplies weighing down on prices. But the pact left the details of how to cut roughly 2% to 4% of its output for later.

Oil dropped after the Organization of Petroleum Exporting Countries failed to agree on country quotas in talks on Oct. 28-29 in Vienna. Non-members such as Russia and Brazil took part in the second day of discussions. The failure to come to an agreement raised doubts about whether OPEC can implement the first supply cuts in eight years at its Nov. 30 summit.

Iran and Iraq have seemed to be the most reluctant members of the Organization of the Petroleum Exporting Countries to agree on reining production ahead of a Nov. 30 gathering in Vienna. The 14-nation cartel is meeting to decide on output reductions aimed at boosting oil prices. International crude remains down more than 60% since mid-2014, closing at  $46.76 a barrel on Friday.

"There is a high possibility of OPEC's petroleum and energy ministers reaching an agreement at the November meeting," said Zanganeh after meeting with the head of the 14-nation cartel, Mohammad Sanusi Barkindo on November 19.

Though Mr. Zanganeh didn’t say how Iran would participate in the deal, an Iranian oil official reiterated the Islamic Republic still wanted to reach its pre-sanctions market share of about 4 million barrels a day but was now close to that level. “We are almost there,” the official said. Iran said it produced 3.92 million barrels a day on average in October but several oil projects have since come on stream.

The Iranian oil minister said that a production freeze deal could send crude prices toward $55 a barrel, alleviating some of the pressure currently plaguing Gulf producers. The group raised its output to a new record of 33.64 million barrels per day in October, with Nigeria, Libya and Iraq contributing the most to the gain. Saudi Arabia, the group’s largest producer, lowered its daily production by 20,000 barrels.

Iraq, OPEC’s second largest producer, is also reportedly upbeat on an OPEC production cut. On Friday, Iraq’s oil minister, Jabbar al-Luaibisaid, told the Wall Street Journal that he was “optimistic” about OPEC reaching an agreement at its next meeting. The report said that it’s a change in tone that suggests the cartel’s most recalcitrant member is coming around to the idea of cutting oil output.