Yemisi Izuora/Agency Report
Experts believe a slow down in oil production could greatly benefit the UAE, but doubts have been cast on whether an agreement on output will be made when OPEC members meet today.
The forum brings together the International Energy Agency (IEA) and OPEC in Tangiers, Algeria starting on Monday until Wednesday and it will provide the opportunity for the 14 oil-producing countries to revisit talks that collapsed in April.
OPEC members may fall short of reaching a deal for an oil production freeze, but their talks could pave the way for a future deal.
In the last two years an over-production of oil triggered a collapse in the price of oil, hitting the economies of Gulf countries.
Robin Mills, chief executive of regional energy consultants Qamar Energy, said while their chances of reaching a deal are slim, a deal would prove positive for the UAE economy.
He said: “Of course you would see petrol prices at the pump go up, but overall it would have a positive impact on the UAE economy and that’s why the UAE and other oil producers are interested in having these talks.”
Iran, who were absent from April’s talks in Qatar, are likely to attend this year, and will be met with a “more constructive” offer by Saudi Arabia, Mills said.
He added: “They [Saudi Arabia] would be prepared to consider a freeze, if Iran would freeze at 3.6 million [barrels]. But I still don’t think they’ll reach an agreement with real impact in Algiers. If they do it will be a very vague and non-limiting one.”
Mills said he expects the UAE would support the Saudi position on a deal, which would be good news for everyone in the country.
He said: “If there is a deal which has real teeth, and I’m quite skeptical of that, then it would support oil prices, and they would go up.
“That means more money for the country, and that’s positive for people working in the UAE economy anywhere, particularly people employed by the government and in the oil sector.”
The talks will take place on a backdrop of oil prices near $50 per barrel, a new energy minister for Saudi Arabia, oil-induced turmoil in Venezuela and low production in Nigeria due to sabotage on their oil installations in Niger Delta, making a deal difficult for a number of members.
“Nigeria, Venezuela and Libya are all struggling with production for domestic political reasons so the freeze is difficult for them because they don’t want to freeze at their current production level cause that’s well below what they think their capacity is,” said Mills.
The meeting also comes on the heels of an oil price slump on Friday as countries continued to pump aggressively and drive the oil price down, said Akshay Singh, a Consultant at Oil and Gas business advisory Contax Partners.
“This clearly indicates that these leading OPEC countries like Saudi Arabia and Iraq are failing to reach a consensus within themselves,” said Singh.
Iran, who said it wouldn’t accept to freeze production until they reached pre-sanction levels of output, at around 4 million barrels per day “have currently reached the cusp of pre-sanctions oil production levels at 3.6 million barrels per day and are managing to recapture their market share” according to Singh.
He added: “Now if Iran agree to a production freeze I think it will totally oppose their overall strategy of becoming the world’s leading oil producer.
“We believe this informal meeting will definitely not lead to an oil production freeze, but would certainly set a platform for taking certain crucial decisions in the upcoming formal meeting in November.”
Aside from the informal talks being held this week, in the absence of an emergency meeting the next official OPEC meeting would be in November.