OPEC is due to hold an informal meeting on September 26 in Algeria and production levels are bound to be a talking point. Several of its 14 members are struggling with the low oil price and there are tensions between rival producers such as Iran (which has so far ruled out any production freeze) and Saudi Arabia.
Croft and her colleagues remained optimistic that “sovereign producers may eventually come to conclude that they have little to lose by agreeing to cap output when they are close to maxing out on production in the near term.”
“Moreover, while geopolitical tensions between key producers continue to run high because of ongoing conflicts in Syria and Yemen, their leaders may yet opt for pragmatism and seek some financial relief that will allow them to keep their increasingly restive citizens content and off the streets.”
Amrita Sen, chief oil analyst at Energy Aspects, told CNBC on Tuesday that a deal was far-off however, especially as OPEC has previously said that it was willing to watch markets rebalance as non-OPEC supply declined and global oil demand picked up.
“It is very hard to come up with a deal, there are so many issues, in particular Iran, which has to agree to do something but it’s very hard for me to see how they’d agree to do anything,” she told CNBC.
Still, she said the announcement from Russia and Saudi Arabia was “very important.”
“This is a good step, I would call these baby steps, but it does look like Saudi Arabia and Russia haven’t been this close in a very long time. They are talking to each other rather than at each other – that’s very important” and the view is that if the two biggest oil exporters can come to a deal, the others might follow suit. I think the tricky bit will still be Iran,” she said.
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