Algerian oil minister Noureddine Boutarfa seized the baton from his Venezuelan counterpart last week, engaging in a sprint around oil producing countries to drum up support for an unspecified proposal to put to Opec members – and maybe to others too – in Algiers at the end of this month.
His jaunt took him to see his Iranian, Qatari, Saudi and Russian peers, as well as Opec’s senior civil servant, secretary-general Mohammad Barkindo.
The indications are that the proposal Algeria has formulated to put to an informal gathering after the International Energy Forum conference will be modest. Whenever a host declares an event “already a success” just because invitees have said they will turn up, you know to limit your expectations. And Boutarfa promises no more than that the gathering “will offer the opportunity to come to an agreement that will favour the stabilisation of the oil market”. Hardly words to stir even the most bullish of bulls.
Where does Boutarfa see that stabilisation? “A price of oil less than $50/bl was not acceptable and is not acceptable either to producer countries or the world economy as a whole. An acceptable price would be between $50/bl and $60/bl.” (As it happens, $55/bl is the price declared “suitable” by Iran’s oil minister last week.)
And Barkindo hardly set his sights high when talking to the Algerian press. Quizzed about a “reasonable price”, he reportedly said that is not what is being sought at the moment. The principal aim in Algiers would be to re-establish the conditions for a stable and durable market, he said.
On the broad canvas, the Algerians have a reputation as master diplomats and consummate realists. Their decision to shoot low at the meeting is a recognition of the well-known obstacles to a simple output freeze, namely that Iran, Libya, and Nigeria would be likely to demand exemptions, while Iraq would probably agree only to a very time-limited deal — something that non-Opec Russia has alluded to.
Another good reason for modesty of ambition surfaced today in the form of Opec’s Monthly Oil Market Report (MOMR). It revises sharply upwards its outlook for non-Opec production in 2016 and 2017 and trims the call on Opec crude.
Market rebalancing looks further away than ever. And what will that do for the atmosphere in Algiers? Well, those poorer producer countries that are most feeling the squeeze of lower prices may be more desperate for a quick fix that will boost markets. Cue a tub-thumping speech from Venezuela. But lift prices and back will come the US tight oil producers that have already proved more resilient than expected, comes the counterblast. And then we are back on the old merry-go-round.
There is a glimmer of hope. The MOMR identifies the main contributor to the 2017 upward revision to production as the forecast return of the Kazakh Kashagan field to the fray, with end-2017 output of 370,000 b/d. The field is so important to Kazakhstan building production as other fields decline that it is unthinkable that Astana could be persuaded to delay or limit Kashagan output. But the benighted history of field must cast doubt on the timing or volumes of its production.