Doha Oil Talks Drag on Amid Dispute Over Saudi Stance on Iran

 18 Apr 2016 - 0:00

Doha Oil Talks Drag on Amid Dispute Over Saudi Stance on Iran
 Saudi Oil Minister Ali al-Naimi, (2ndR) arrives at an oil-producers' meeting in Doha, Qatar, on April 17, 2016. AFP / KARIM JAAFAR

Talks in Doha between some of the world’s biggest oil producers on freezing production dragged on into the evening amid disagreements on the wording of the agreement, in part to address Saudi Arabia’s stance on Iran.

Discussions continue on a rewritten draft accord to freeze output at “an agreeable level” as long as all OPEC countries and other major producers join, said three people with knowledge of the matter, who asked not to be identified because the talks were private.

Sixteen nations representing about half the world’s oil output have gathered in the Qatari capital in a bid to stabilize the global market, the first significant attempt at coordinating oil output between the Organization of Petroleum Exporting Countries and nations outside the group in 15 years. On April 14, Saudi Arabia’s Deputy Crown Prince said the kingdom wouldn’t agree to restrain its production unless other producers, including Iran, agree to freeze. Iran, which isn’t attending the meeting, has ruled out joining the accord for now.

“Discussions are at a very high level between the Saudis, Russians and Gulf countries,” over Iran’s output, Wilson Pastor, Ecuador’s governor to OPEC, said in a Bloomberg Television interview in Doha before the start of formal talks. “The general agreement is in place,” but there were some disagreements on the wording, including details yet to be finalized on monitoring the accord and a follow-up meeting, he said.

Crude oil has rallied since the freeze was first proposed in February. Failure to reach an agreement would lead to a “severe” drop in prices, Citigroup Inc. predicted before the meeting. Brent crude settled at $43.10 a barrel Friday in London, having risen by more than 50 percent from a 12-year low in January.

Kuwait Strike

While analysts agreed any accord to emerge from Doha would have little impact on supplies, an oil workers’ strike in Kuwait is already having an effect. The nation’s crude production tumbled 60 percent to 1.1 million barrels a day and refineries scaled back operations because of the open-ended action over pay, said Saad Al-Azmi, deputy chief executive for finance and spokesman at Kuwait Oil Co. The disruption is equal in size to the global surplus and could boost prices on Monday, Dubai-based bank Emirates NBD PJSC predicted.

Iran is restoring exports after sanctions over its nuclear program were lifted in January. It plans to boost output to 4 million barrels a day in the Iranian year through March 2017, Oil Minister Bijan Namdar Zanganeh said April 6. That would be an increase of about 800,000 barrels a day from March production. The nation’s crude shipments have risen by more than 600,000 barrels a day this month, according to shipping data compiled by Bloomberg.

Ministers held informal closed-door talks earlier Sunday, according to two officials with knowledge of the meeting. Delegates also visited the palace of the Emir of Qatar, said another person with knowledge of the situation.

Everybody is “optimistic,” Kuwait’s Acting Oil Minister Anas al-Saleh said before the meeting, adding that a deal would “hopefully happen.” Saudi Arabia and Russia have approved the proposal to freeze crude output at January levels until Oct. 1 and other producers are expected to do so, Omani Oil Minister Mohammed Al Rumhy said prior to the meeting.

Saudi Position

“If all major producers don’t freeze production, we will not freeze production,” Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said in an interview April 14. “If we don’t freeze, then we will sell at any opportunity we get.”

Saudi Arabia, the world’s biggest crude exporter, would cap its market share at about 10.3 million to 10.4 million barrels a day, if other producers agreed to the freeze, the prince said at King Salman’s private farm in Diriyah. The world’s largest oil exporter could increase output to 11.5 million barrels a day immediately and go to 12.5 million in six to nine months "if we wanted to," he said.

“We coordinate with all producers and we are very positive with them,” said Prince Mohammed, 30, who has emerged as Saudi Arabia’s leading economic force. “Our problem is only with those who don’t want to work with us.”

Iran’s Zanganeh, said Saturday he won’t attend the Doha talks and won’t be a signatory to any deal as it would amount to self-imposed sanctions on the country which is restoring crude production after the removal of a ban on its shipments.

The proposed freeze agreement has no enforcement mechanism, Oman’s Al Rumhy said, though he said he expects everyone to stick to it. The pact is open for other producers to join, he said.

The meeting in Doha is only relevant if no deal is reached, prompting a sharp sell-off in the markets, according to Ed Morse, head of commodities research at Citigroup Inc.

The recent rebound in oil futures suggests that the 20-month sell-off could be hitting a bottom, amid efforts to reduce the supply glut, OPEC Secretary General Abdulla El-Badri said in a statement posted on Saturday on the website of the International Monetary Fund.