Saudi Arabia just dropped an important signal on an OPEC deal

Reuters/Leonhard Foeger/File Photo

Expectations for the success of the upcoming OPEC meeting in Algeria continue to seesaw, with comments from top officials from member countries continuing to alter oil market sentiment.

As recently as a week ago the prospects for a deal looked slim. But the favorable comments from several OPEC nations may have cracked open the door to deal just a bit. Earlier this week Iraq’s Prime Minister said that his nation would support a production freeze in Algeria. Separately, Iran said that it would attend the meeting, and although it has not yet deviated from its longstanding position that it would not sign on to a deal until it reached its pre-sanctions production levels, its attendance was seen as a positive sign.

On Thursday, Saudi Arabia, OPEC’s most influential member, also boosted the odds of a deal when its foreign minister said that OPEC members were moving closer to an agreement. "I think there is a move toward a common position, toward a common effort," said at a conference in Tokyo, according to Reuters. "If other producers were to agree it is reasonable to accept Saudi Arabia to go along with it."

He went on to add that OPEC members are probably more open to negotiation than they have been in the past. "If you want to have an impact then all of us have to shoulder the responsibility, and I believe over the past five or six months, I believe that there has been an increasing realization that this is a collective effort," Al-Jubeir said.

The newfound sense of congeniality between rival OPEC members has upended expectations that negotiations in Algeria were heading nowhere. All of a sudden, the stars seem to be aligning towards a production freeze, although, to be sure, such a policy will hardly limit output levels from OPEC members that are already at record highs.

In another twist, Russia’s energy ministry said that there was no need for talks on a production freeze at the moment. Russia had participated in the earlier iteration of the production freeze talks in Doha in April, but energy minister Alexander Novak seemed to throw cold water on this round of talks. The ministry said that Russia would reconsider resuming negotiations on a freeze if oil prices fell once again.

That is bad news for the prospects of a deal – on the other hand, crude prices are down sharply this week.

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