Oil producers head for key Algiers talks
Brent futures fell almost four per cent on Friday to close at $45.89 a barrel, less than half the price two years ago.
Dubai - There has been a flurry of meetings from Vienna and Paris to Moscow as oil producers attempt to reach a consensus
The Organisation of Petroleum Exporting Countries, or Opec, which pumps about one third of the world's oil supply, needs to cut production to sustain a rise in crude prices above $50 a barrel, according to the majority of respondents polled in a Gulf Intelligence GIQ Industry Survey.
The survey results come ahead of a crucial meeting of Opec and non-Opec producers on September 28 in Algeria in a bid to reach a deal to boost prices by limiting oil production. In April, oil producers met in Qatar to discuss the proposal but failed to agree on a cap after Iran, which wants to boost exports after years of sanctions, refused to join in. Opec last reduced supply in 2008 when the global economic crisis crippled demand.
If the world's biggest oil producers agree to freeze output when they meet in Algiers later this week, they must slash supply to support a protracted price rally, according to two-thirds of the 250 international energy executives operating across the Gulf who participated in the GIQ poll on September 22.
Meanwhile, 20 per cent of the survey respondents said crude oil prices will fall and test new cycle lows as they did earlier this year if Opec and its non-Opec peers fail to agree to at least cap production at current levels.
There has been a flurry of meetings from Vienna and Paris to Moscow as oil producers attempt to reach a consensus. If Opec - which stands to lose $1 trillion in revenues due to the plunge in oil prices - reaches an agreement between them in Algiers, Russia plans to join discussions on limiting oil production. Saudi Arabia, the world's largest oil exporter, has told Iran it would be willing to reduce its output - which is close to a record 10.7 million barrels a day - if its regional rival were to cap production at 3.6 million.
The decision by Opec to hold informal talks in Algiers has fanned speculation that the group might abandon a two-year-old policy of pumping without limits and instead move to curb output to boost prices.
The delegation from Moscow may leave the Algerian venue before September 28 and wait for an invitation to continue talks, the people said. It would join comprehensive output-freeze discussions only after Opec members decide on the issue at their own meeting, they said.
"This is the right time for action as all stakeholders are ready," Dr Falah Alamri, Iraq's Opec Governor, said in reaction to the survey results. "In Doha in April, some producers weren't ready to participate as they were still chasing market share, but they are now. We have to do something as the lower price isn't acceptable to anybody, not for producers or consumers - even developed economies are hurting from this," he said.
Brent futures fell almost four per cent on Friday to close at $45.89 a barrel, less than half the price two years ago. Crude oil rallied last month on speculation Opec and Russia might announce an agreement in the Algerian capital, but prices have since retreated on doubts there will be any serious steps to reduce the world oil surplus.
The IEA reported earlier this month that crude oil inventories stored in OECD countries have "smashed through" 3.1 billion barrels during the first half of this year, which amount to about 300 million barrels above the five-year average. However, the good news is that BP reported that the market has reached a tipping point as stocks have started to draw down.
Still, the GIQ survey respondents were quite divided on how fast it would take for inventories to drawdown sufficiently so that they would no longer impose downward pressure on oil prices, with 36 per cent saying it wouldn't happen until 2018, while 32 per cent of the Gulf industry executives polled were of the view that stocks would decline adequately by the end of 2017. That said, 57 per cent of those polled shared the view that Brent crude oil would average in the $50s next year.