Oil producers converge towards a deal to raise prices

MOHAMED MESSARA

OPEC logo seen at the Palace Congress building during 15th International Energy Forum (IEF15) and informal meeting of the Organization of Petroleum Exporting Countries (OPEC) ministers in Algiers, Algeria, 28 September 2016.

A key deal between Iran and Saudi Arabia paves the way for a surge in oil prices


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There is increasing speculation that a deal between Iran and OPEC has been reached. This is key in a global deal to curb oil production.

Producers convergence

The deal is said to have been brokered at a natural gas summit in Doha.

OPEC oil ministers will meet in Vienna on November 30th, where negotiations will be finalized with third parties. If the agreement is successful, it would be the first of its kind since 2008.

Sources told Reuters on Friday that Saudi Arabia and Iran agreed in principle to cap oil output; under the Riyadh-Tehran agreement, Iran will be able to produce 3.92 million barrels a day.

The level of production agreed between Riyadh and Tehran is lower than what Iran had before international sanctions, but higher than current production levels.

The Russian Energy Minister, Aleksandr Novak, said last week that Moscow is also willing to join OPEC in a global agreement. Iraq is not likely to join.  Speaking at the Asia-Pacific Economic Cooperation (APEC) conference in Lima on Sunday, President Putin confirmed Russia is ready to limit output.

Azerbaijan will also send a delegation to Vienna.

Iran’s market share

In 2016, Iran became India’s top supplier.

According to the 2016 World Energy Outlook, India is emerging as the main global demand-driver. India is a market that accounts for a sixth of the global population and merely 6% of global energy production. 240 million people do not as of yet have access to electricity, while India’s population will surge by 340 million people by 2040. That is in a country that is currently dependent on oil imports to cover 90% of its needs.

Iran’s foothold in that particular market is strategically significant.

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