Oil prices are at the highest today as OPEC experts make some progress on the agreement allowing to significantly cut the oil outputs of the bloc to support dropping oil prices.
After a number of unsuccessful meetings, the market participants were suspicious whether OPEC would actually come to any meaningful conclusion during its meeting in Algiers on 30 November. However, earlier today, oil prices got a significant boost after a Nigerian official attending the bloc's two-day technical meeting had said that all OPEC countries would be "on board" regarding the agreement by the day-end today. Everyone including Iran and Iraq, he said, even though both countries were strongly against production cuts.
Brent crude oil futures (NYMEX: XBR/USD) jumped 0.89% to $50.21 today, on top of an earlier $1 rise pushing crude through the $50 mark for the first time in weeks, reported Reuters. At the same time, the U.S. WTI crude futures (COMEX: XTI/USD) reached $48.54 per barrel. The jump in oil price showed that the market was increasingly positive that OPEC would finally overcome internal conflicts between the countries and come to a long-awaited agreement.
Unfortunately, the two-day meeting taking place in Vienna at the moment can only result in a recommendation towards OPEC's next meeting on 30 November but not the policy itself, say the experts. Today morning, the High-Level Committee, which is a technical body of OPEC governors and countries' representatives, started their second meeting day.
Some industry experts said that if OPEC fails to reach an agreement on oil production freeze again this would significantly affect the credibility of the entire bloc in the eyes of other market players.
"We have all along expected that OPEC would strike a deal as failure would have further removed its credibility," an analyst Ole Hansen told Reuters.
However, the problem of Iraq, Iran and Libya arguing that they should be exempt from production cuts is still there. Even though Nigerian delegate Ibrahim Waya told Reuters that the committee would finally agree on the cut conditions tonight, the latest news suggests something else. Iraq's Foreign Minister Ibrahim al-Jafari told the reporters today that his country was not going to approve the production cut because of Iraq's "special situation". Iraq is the second-biggest OPEC producer, after Saudi Arabia.
"We think we should increase output. Iraq is in a special situation ...we are at war. It would not be fair for us to cut oil output," said al-Jafari, as reported by Reuters.
It seems like we can only guess whether the bloc will reach an unanimous agreement this month, as the conflict between the countries is still unresolved. But can the market wait any longer?