OPEC will
debate an oil output cut of 4.0-4.5 percent for all of its members except Libya
and Nigeria next week but the deal's success hinges on an agreement from Iraq
and Iran, which are far from certain to give full backing.
Three OPEC
sources told Reuters a gathering of experts from the oil producer group in
Vienna had decided on Tuesday to recommend that a ministerial meeting on Nov.
30 debate a proposal from member Algeria to reduce output by that amount.
Such a cut
would bring OPEC's current output down by more than 1.2 million barrels per day
(bpd), according to Reuters calculations based on the group's October
production, and is toward the upper end of market expectations.
But sources
also said the representatives of Iran, Iraq and Indonesia had expressed
reservations about their level of participation in what would be the group's
first supply-limiting deal since 2008.
Brent oil
futures were trading flat at around $49 per barrel, paring earlier gains of
around $1 a barrel. As of 1600 GMT, the meeting had yet to end.
In September,
the Organization of the Petroleum Exporting Countries agreed to reduce
production to between 32.5 million and 33.0 million bpd - an effort to prop up
prices - from OPEC's own latest production estimates of 33.64 million bpd.
OPEC's deal
faces potential setbacks from Iraq's call for it to be exempt and from Iran,
which wants to increase supply as its output has been hit by sanctions.
Iraq's foreign
minister said on Tuesday in Budapest that OPEC should allow Iraq to continue
raising output with no restrictions.
BIG BARGAIN
Iran and Iraq
raised certain conditions for participating in the deal, according to sources,
who were not allowed to speak on the record because the experts were meeting
behind closed doors.
Sources said
Saudi Arabia and its Gulf allies have signaled they were prepared to cut as
much as 1 million bpd of their output.
The Algerian
proposal would see all member countries, except Nigeria and Libya, cutting
4-4.5 percent from OPEC's estimates of their October production with the aim of
reaching a total output target of 32.5 million bpd, OPEC sources have said.
That would
mean Saudi Arabia alone could cut up to 500,000 bpd, sources said.
OPEC's own
estimates, based on so-called "secondary sources", are usually lower
than countries' direct submissions to the organization.
Under the
Algerian proposal, Iran was asked to cut 4.5 percent from almost 4 million bpd,
according to sources. But Tehran is signaling it wants to cut from higher
levels of 4.1-4.2 million bpd, one of the sources said.
Iraq was asked
to cut about 200,000 bpd. Baghdad is also still debating whether it should cut
from the levels of OPEC's estimates or its own, higher, production figures.
"Eighty-five
percent of proposed OPEC cuts are from Gulf countries but Iran is still not in
favor," one source said.
Non-OPEC
producer Russia was also still not agreeing to cut production but favoring a
freeze, a senior OPEC delegate said.
"This
will make it difficult for OPEC alone to rebalance the market and bring prices
up," the source said.
Reuters
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