Kemp: OPEC Talks Struggle With Question Of Market Share
(John Kemp is a Reuters' market analyst. The views expressed are his own.)
LONDON, Nov 23 (Reuters) - OPEC officials are struggling to reach a final agreement on how to share out production cuts implied by the preliminary output accord agreed by ministers in September.
In theory, all OPEC members would benefit in absolute terms if an output cut produced even a modest and sustained rise in oil prices, so there are strong financial incentives for a deal.
But all members are acutely aware an agreement is about more than just a short-term boost to export earnings and has implications for the future regional power structure in the Gulf, which makes a deal harder.
Saudi Arabia will not accept any diminution of its dominant role as the world's largest oil exporter and the major financial power in the Gulf region. By contrast, Iran and Iraq do not want to cement Saudi hegemony.
The political implications for the regional power structure caused the last attempt to negotiate a production deal to fall apart in Doha in April, when it was vetoed by the Saudi royal court, and could yet do so again.
Output And Power
OPEC members need to find cuts totalling at least 640,000 barrels per day (bpd) and perhaps as much as 1.14 million bpd to bring production back into line with the target of 32.5 to 33.0 million bpd (http://tmsnrt.rs/2gc3wDN).
Saudi Arabia has indicated a willingness to curb its production provided cuts are shared equitably among the organisation's members and the agreement is transparent, credible and verifiable.
Saudi officials have indicated any agreement can provide some flexibility for Libya and Nigeria, both of which have been hit by supply interruptions which officials characterise as temporary.
But Iran, which claims its output is still recovering from the imposition of secondary sanctions by the United States between 2011 and 2015, has a more ambiguous claim to flexibility.
And Saudi officials have made clear that all members of OPEC must share in the burden of production cuts, including Iraq.
In theory, the negotiations turn on mundane issues including claims for exemptions and the use of members' own production data versus estimates from "secondary sources" to establish baselines from which to cut.
In reality, the negotiations are about the profound issue of sharing out oil revenues and diplomatic, military and economic power, which is what makes progress so difficult.
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