By Jean-Michel Bezat
The fourteen members of the Organization of Petroleum Exporting Countries (OPEC) meeting Wednesday, September 28 in Algiers finally reached release an agreement in principle on the fall in production to do back courses oil . The organization would reduce its production between 32.5 and 33 million barrels per day (against 33.24 million today). This is the first time since the cartel reacts 2008, when the post-Lehman Brothers financial crisis had dive $ 147 a barrel during the summer unless $ 35 six months later.
- What will be the impact on prices?
Although fragile, this agreement should board oil above $ 50 a barrel, still far from the 114 dollars reached in June 2014. This decline in production – the first since 2008 – should be of around 700,000 barrels per day, or one-third half the global production surplus.
Markets welcomed this decision: in the late afternoon, the price of US crude West Texas Intermediate (WTI) closed up 5.3% (47.05 dollars) in New York. In four days, WTI and Brent North Sea returned 6%. In Stock Exchange oil stocks were blazing in Thursday morning Europe . A Paris Technip, Total, Vallourec or CGG jumped in early trading.
- Why this agreement is it a surprise?
The day before meeting Bijan Zanganeh, the Iranian oil minister , reaffirmed that such an agreement was not possible in two days. Yet it is an approximation of views between the two enemy brothers cartel, the Saudi Arabia and Iran which emerged from this consensus. “OPEC has taken an exceptional decision today. After two and a half years, OPEC has reached a consensus to control market “ said Bijan Zanganeh. The Algiers agreement is an improvement over the Doha summit failed ( Qatar ) on April 15, where Saudis and the Iranians were not able to s hear.
- Why such a turnaround in Saudi Arabia?
Saudi Arabia is in urgent need of additional petrodollars. The financial situation of the Wahhabi kingdom, the world’s largest exporter of crude, has deteriorated sharply. The budget deficit reached $ 98 billion in 2015 and will represent nearly 14% of GDP this year. Riyadh had to resolve to announce pay cuts of its officials, an unprecedented step in its history . In the longer term, the country wants out his addiction for black gold.
- Why analysts are skeptical they?
After this decision, the hard part at the OPEC meeting on 30 November in Vienna. It will indeed determine the contribution of each country. Riyadh has apparently softened its position, which consisted of refuse any gel as Tehran and non-OPEC countries such as Russia would not be ready to share t effort.
Finally, three countries would be allowed to produce “at maximum levels that make sense” said the Saudi oil minister, Khalid Al Falih: the Iran, hit by international sanctions; Nigeria hit by rebel attacks on its oil installations in the Delta Niger and Libya ravaged by civil war.
But analysts also know that OPEC members have not always respected the production quotas allocated to them. And the Russians, despite their statements have never been hard to strengthen valves. Sign that analysts do not overestimate the importance of this agreement in Algiers, oil prices have started to fall Thursday afternoon in Asia.