OPEC is convening its 171st meeting in Vienna on Wednesday, where the members are expected to try and reach an agreement on freezing production to stabilize the oil prices.
The meeting follows a conference in Algiers on September 28, where member countries agreed in principle on a new production target range of 32.5 million barrels per day, which should speed up the drawdown of the stock overhang and bringing the market rebalancing forward.
Speaking ahead of the meeting, Mohammed Bin Saleh Al-Sada, Qatar’s Minister of Energy and Industry and President of the OPEC Conference, said that from the supply and demand perspective, there are signs that the rebalancing of the fundamentals is underway, however, the “stubbornly high” overhang remains to be a major worry.
“It is vital that stock levels start to fall, as the decision taken in Algiers recognized. As we have seen in previous cycles, once this overhang starts falling on a regular basis then prices start to rise and more stability will return to the market,” Al-Sada said.
Despite all the negativity surrounding the oil industry in the past two yers, Al-Sada says oil remains a growth business, with oil demand in OPEC’s 2016 World Oil Outlook reaching over 109 million barrels of oil a day by 2040, “a healthy increase of over 16 million barrels a day.”
He also said that in order to keep it a growth business significant investments are needed in the upstream, midstream and downstream. Overall, estimated oil-related investment requirements are close to $10 trillion in the period to 2040, he said.
Closing his speech ahead of the start of the meeting, Al-Sada said: “I feel we have already taken great steps to shape a fair and common understanding among us all. And I have the sense that everyone here remains committed to ensuring we find the solutions needed to implement the ‘Algiers Accord.’ We all have a common goal of developing a lasting solution that brings forward the rebalancing process, reduces the length of the downturn, lessens volatility and stabilizes the market.”
To remind, OPEC Secretary General earlier this month said the participation of Iran in the implementation of the Algiers Accord was crucial.
According to Iran’s Shana news agency, prior to taking off for Vienna on Tuesday, Iranian energy minister Bijan Zangeneh said the country would implement “what we agreed in Algeria for reduction of level of production.”
Also, Reuters has reported that Saudi Arabia is willing to accept “a big hit” to its oil output in order to meet the ceiling agreed in Algiers. The news agency also said , citing Saudi Energy Minister Khalid al-Falih that the Saudi’s would agree to Iran freezing output at pre-sanctions levels.
Brent oil prices rose 7 percent, reaching nearly $50 a barrel, ahead of the expected OPEC output freeze deal.
Offshore Energy Today Staff