OPEC Plans 1mbpd Cut In Production Quota At Wednesday Meeting

Oil cartel, Organisation of the Petroleum Exporting Countries (OPEC), will on Wednesday discuss a proposal that would cut an estimated one million barrels per day of production over a period of one year, Wall Street Journal quotes people involved in the discussions as saying.

Under the proposal, to feature at an informal gathering on the sidelines of an energy conference in Algiers, which may lead to a showdown between archrivals- Saudi Arabia and Iran in Algiers, Saudi would be the most affected as it cuts 400,000bpd from its record highs of almost 10.6 million barrels a day in August.

It is to be followed by Iran, which must agree to freeze 3.7 million barrels a day—slightly above its August levels, the sources added.

The scenario is meant to start discussions that could pave the way for an agreement when the producer group meets again in November and should the members agree, would represent the cartel’s first concrete action to prop up the market since oil prices crashed beginning in 2014. It would also represent a departure for Saudi Arabia, which has opened the spigots wide during the market slump in a fierce competition for customers with U.S. oil producers and others.

It is not clear if Iran, which plans to increase its production to over 4 million barrels a day, would agree to the Saudi-backed plan, at a time when Iranian Oil Minister Bijan Zanganeh said that Wednesday’s meeting was only for consultations and that his country had no plans to limit its oil production. Iran is trying to ramp its production back up now that Western sanctions that crippled its oil industry have ended.

The proposal comes as OPEC tries to find a consensus this week on how to react to oil prices that have stayed stubbornly low for two years.

OPEC Secretary-General Mohammad Barkindo said the informal gathering could be turned into an emergency formal meeting if the cartel finds consensus, just as Zanganeh said this week represented consultations that pave the way for a deal at the group’s next meeting on November 30 in Vienna.

Without providing details about the proposal, Mr. Barkindo told reporters that over 340 million barrels of production must be taken out from the market to bring stored crude levels to acceptable levels. Under the proposal, OPEC would cut about 350 million barrels from the market over one year.