OPEC cobbles a preliminary accord on cutting output
ALGIERS, Algeria - OPEC countries neared agreement on a preliminary accord Wednesday to limit oil production, sending oil prices upward, despite lingering differences between regional rivals Saudi Arabia and Iran.
Officials from the Organization of the Petroleum Exporting Countries were meeting informally on the sidelines of an energy conference in Algiers to try to find common ground on how to support oil markets. Experts say that would require a decision to limit output -- an idea Iran still views with skepticism as it’s trying to restore its oil industry since emerging from international sanctions this year.
Algerian officials said participants reached a “pre-accord” on production curbs to be finalized at an OPEC meeting in Vienna in November. Algeria’s prime minister is scheduled to provide details later Wednesday night. The officials were not authorized to be publicly named.
Benchmark U.S. crude jumped $2.38, or 5.3 percent, to $47.05 a barrel in New York. Brent crude, the international standard, was up $2.72, or 5.9 percent, to $48.69 a barrel in London.
Iran would not have the same proportional reductions as other countries under the pre-accord, but would limit production to 3.7 million barrels a day, according to an adviser to Algeria’s energy minister. It is currently estimated to be pumping around 3.6 million.
Algerian officials shuttled through the night between delegations to try to secure agreement.
Earlier, Iranian Petroleum Minister Bijan Namdar Zanganeh played down the OPEC gathering, calling it “just a consultation meeting ... If there is a decision, it should be taken at the next meeting in Vienna in November.”
The price of crude oil has fallen sharply since mid-2014, when it was over $100 a barrel, dropping below $30 at the start of this year.
Saudi Arabia, the world’s biggest oil producer and Iran’s rival for power in the Middle East, appears to be more amenable to some sort of production limit, certainly more so than in April when OPEC failed to agree on measures to curb supplies.
Saudi Energy Minister Khalid Al-Falih has this week promised to “support any decision aimed at stabilizing the market.”
Over the past couple of years, OPEC countries, led by Saudi Arabia, had been willing to let the oil price drop as a means of driving some U.S. shale oil and gas producers out of business. Shale oil and gas requires a higher price to break even.
Those lower prices have hurt many oil-producing nations hard, particularly OPEC members Venezuela and Nigeria, but also Russia and Brazil.