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ALGER, Algeria – OPEC producers are largely in agreement that oil prices above $ 80 a barrel would be too high. But there is widespread disagreement over how the cartel and its allies should contain crude prices once US sanctions banning Iranian oil sales take effect in November.
Members of the Organization of Petroleum Exporting Countries and a Russia-led alliance are meeting Sunday in the Algerian capital to discuss price stabilization options, which rose by 40% last year. At the same time, some OPEC member countries also want to conclude an agreement, reached in June, that relaxes previously agreed production cuts.
Delegates question whether an increase in production may be necessary to offset the return of US sanctions on Iranian oil and whether each OPEC member state should decide individually how to increase production or whether a strict quota system should be applied .
Algeria supports the maintenance of strict limits for individuals, while Saudi Arabia and other producers in the Persian Gulf are considering easing these agreements.
"If we dismantle the quotas, it will be a mess," Abdelmoumen Ould Kaddour, chief executive of the Algerian energy company Sonatrach, told Wall Street Journal. He warned that the end of production allowances could lead to the repetition of falling prices in 2014. For OPEC and its non-OPEC allies, "we need a system where everyone is organized and disciplined. "
The group does not need to make a formal decision until December. But as prices have risen to $ 80 a barrel in recent days, preliminary discussions this weekend have been urgent. Brent, the global benchmark, closed Friday at $ 78.80 a barrel.
"It is the price of a barrel that must determine the volumes to be produced and not the reverse," said Ould Kaddour, who will attend the meeting. This position signaled by Mr. Ould Kaddour contrasts with that of other OPEC producers, who argue that production decisions are based on supply and demand rather than on prices.
"If we do not stabilize prices between $ 70 and $ 80 per barrel, we will have an unmanageable situation … The savings will slow down," said Ould Kaddour.
If prices are greater than $ 80 [a barrel], we can consider a slight increase in OPEC production levels, he said, but it is too early to know what could be decided in December, as Iran sanctions, instability in Libya and the crisis in Venezuela remain uncertain.
Saudi Arabia, Nigeria and other participants at the meeting do not want prices to rise above current levels for fear that this will limit demand or trigger a collapse in prices, according to people familiar with it.
In 2014, a decision by OPEC in Saudi Arabia to flood the oil markets and not to impose a lower price accelerated the fall from about $ 100 to $ 35 a barrel. Two years later, Algeria, supported by Riyadh, helped reverse this trend by convening a meeting at which OPEC decided to make its first intervention in the oil market in eight years.
Most producers now agree that they should not allow price rush, which could lead to higher prices for gasoline and fuels for consumers and a reaction from the United States. .
But some officials want the freedom to act unilaterally without quotas because they fear that Iran will not formally agree to lower its quota. In 2011, Iran blocked a Saudi plan to boost production while Tehran supplies were also limited by sanctions. OPEC was then compromised by stopping individual allocations and establishing a collective production cap.
"The idea in everyone's mind is to avoid talking about quotas … and avoid the tragedy with Iran," said a senior official attending the meeting.
Write to Benoit Faucon to [email protected] and Summer Said at [email protected]
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