Russia and Iran Could Cause Problems for Oil Deal in OPEC
Russia and Iran emerged as the potential deal breakers in the cutting of worldwide oil production, as OPEC or the Organization of Petroleum Exporting Countries engage in diplomacy prior to their meeting scheduled for Wednesday in Vienna.
OPEC in September agreed to cut production to lower the oversupply globally of oil but left out the details of what country cuts what and how much, until the meeting on Wednesday.
The meeting arrives two years after it was decided by OPEC to allow oil prices to plunge, as the market dropped to historic lows ushering in a time of inexpensive prices for users.
Russia, which is not part of the oil cartel, announced last week it would be willing to hold production at the same amount and forego increases in output in 2017, but stopped short of saying it would cut output.
On Saturday, Iran said it was in negotiations for an exemption from lowering its output, which is the third highest in the OPEC cartel of 14 countries behind Saudi Arabia and Iraq.
Some OPEC members are worried they will cut their production and then watch others move in and take market share, which happened during the 1980s.
While nations that suffered from oil disruptions like Libya and Nigeria will get requested exemptions, officials in Saudi Arabia do not want to make their own sacrifices and then given Iran, a bitter rival, permission to keep increasing output.
On Sunday, the energy minister of Saudi Arabia Khalid al-Falih is reported to have said that the oil market would rebalance alone and questioned a need to cut production.
Saudi Arabia turned its back on a deal last April for member of OPEC and Russia to keep output at the levels they were because Iran did not take part in the agreement.
Saudi Arabia and Iran have been bitter rivals for years. The two have battled for power across the Middle East, as opposites in conflicts currently in Yemen and Syria. Saudi Arabia is mostly Sunni, while Iran Shiite.
One official from OPEC said that Saudi does not want to cut its production and then have another country replace it.
Oil prices were lower on Monday with Brent dropping 31 cents to $46.94 per barrel.
Venezuelan and Algerian oil ministers were in Moscow Monday in an attempt to entice the Russians into the fold. Algeria’s oil minister has been influential in the negotiations the last few months and will speak in Vienna with his counterparts from Saudi Arabia, Iraq and Qatar.