The world’s most powerful oil-producing nations (minus the US) are in Algeria this week for the International Energy Forum, a three-day talking shop that could see agreement on an output freeze.

But despite some warm noises from some key members, hopes are not high. In April, after weeks of hype, a meeting in Doha failed to produce a deal and markets are sceptical about one this time.

So will Opec reach a deal in Algiers or is this another Doha?




Oil prices have collapsed from above $100 a barrel in mid-2014, sinking to 13-year lows below $30 a barrel in late January 2016. Crude has recovered some ground since to trade around $45 but the global glut that sparked the sell-off two years ago has yet to end.

Since 2014, Opec members have been engaged in a war of attrition, ramping up production despite falling prices in order to defend market share.

Production continues to accelerate. Saudi Arabia – previously the swing produce that could cut output to defend prices – pumped a record 10.7 million barrels a day (b/d) in August.

Opec production rose to 33.47 mb/d in August, according to the latest report from the International Energy Agency. Kuwait and the UAE hit new record highs, while Iraq and Iran also lifted supplies. Overall OPEC supply was 930,000 b/d above a year ago.

Russia, which is closely involved and may be an important power broker between Opec members, is also opening the taps. It produced over 11 million barrels a day in September.

Options and Chances


The likelihood of a deal is not high, if past experience is anything to go on. However, there may be a little more urgency this time as the persistently low level of crude has hit the public finances of the major producers. Moreover, the outlook for the market does not appear to be excessively supportive of higher prices.

Options on the table include freezing production at levels seen in January or August 2016. They could also seek to keep production at the average of the first quarter or first half of 2016. 

Iran is seen as the key. If it agrees to freeze output around 3.6m barrels a day Saudi Arabia may be persuaded to play ball. If Iran and the Saudis agree the other members would likely follow suit.

Getting Tehran round the table is progress in itself. The Doha deal failed to materialise because Iran wouldn’t attend. The country wants to raise production to 4m barrels a day, the level of output before it was slapped with sanctions five years ago.

"We will not come out of the meeting empty-handed," Algerian energy minister Noureddine Bouterfa was reported to have said. But this could simply mean progress towards a deal at a later date. If a deal is not done this week the next Opec meeting in Vienna in November could see an agreement. Markets will have to keep guessing.



Rebalancing between supply and demand is hot happening fast enough to support high prices. According to the IEA, global oil demand growth is slowing faster than initially predicted. “For 2016, a gain of 1.3 mb/d is expected – a downgrade of 0.1 mb/d on our previous forecast due to a more pronounced 3Q16 slowdown. Momentum eases further to 1.2 mb/d in 2017 as underlying macroeconomic conditions remain uncertain,” the agency warned.

Meanwhile, world oil supplies fell by 0.3 mb/d in August, driven by a fall in non-Opec members.

But non-OPEC supply is expected to return to growth in 2017 (+380,000 b/d) following a decline of 840,000 b/d this year.

In other words, the window for curbing production is closing. If Opec doesn’t agree to something this year we could see oil prices in interest rate territory – lower for longer.

Prices look like they are finding some kind of happy level, but this could be blown apart by any number of events. Medium to long-term, there is a sense that prices will need to sit somewhere between being high enough to support US shale production (costs are coming down fast), ​but not so low that Opec has to act more decisively than jawboning prices higher from time to time.