Iraq’s prime minister said the country is willing to cut some of its own production, in a move that could smooth the way to a supply deal when Opec, the oil cartel, meets next week.
Haider al-Abadi said Iraq would “shoulder responsibility” for some of the planned reductions of the 14-member group’s output to bolster the oil price, according to comments reported by Reuters.
The price of Brent crude, the international benchmark, rose 20 cents to $49.28 a barrel following the news, from an earlier low of $48.56 a barrel. West Texas Intermediate, the US marker, increased 25 cents to $48.27 a barrel, from a low of $47.40.
A preliminary agreement was reached in September in Algiers to reduce output in an effort to end a two-year old supply glut and bolster prices. But some crucial details, including individual country allocations, are still to be ironed out ahead of the meeting in Vienna on Wednesday.
Iraq has proved in recent weeks to be an obstacle to any final deal. It has questioned the figures from which any production cut will be calculated and believes it should be exempt — alongside Libya and Nigeria — after years of war.
While Mr Abadi’s comments were light on detail, and did not specify the level from which Iraq will make any cuts, they have raised the chance of Baghdad supporting an agreement to reduce output next week.
Iran, which will not cut but freeze production as it recovers after years under western sanctions, has also disputed numbers used to calculate its own production. Saudi Arabia, Opec’s kingpin, has indicated it may be willing to give Iran some flexibility but still wants it to agree to some restrictions.
Opec reached an accord in Algiers to limit production to between 32.5m barrels a day and 33m b/d. Consensus around a final deal would imply a cut of at least 800,000 b/d from current levels.
Saudi Arabia has said any deal should be co-ordinated and credible, people familiar with the kingdom’s policymaking have said. It has also sought support from Russia, the largest exporter outside the cartel, which has said it would work with the kingdom to stabilise the market.
The kingdom is pushing Russia to curb its output, but one delegate said Saudi Arabia is concerned recent public statements from Moscow indicate it is unlikely to go further than freezing production. Russia has never publicly committed to a cut, but some delegates have said privately they have not ruled it out.
It is still unclear if Moscow will reduce its production, freeze it or participate at all. Russia has said Opec must first reach consensus among its members. The country had agreed to participate in a co-ordinated production freeze between Opec and non-Opec countries earlier this year, but Saudi Arabia scuppered a deal at the last minute.
Without an Opec cut, prices will remain under pressure, say oil analysts. “Global rebalancing will progress much more slowly than previously expected and be pushed beyond next year,” said analysts at Société Générale.
Separately the US Department of Energy said crude stockpiles fell unexpectedly last week by 1.3m barrels, compared with analysts’ expectations for an increase of 671,000 barrels. Stocks at the Cushing, Oklahoma, delivery hub dropped by 87,000 barrels, the Energy Information Administration said.
Strength in the dollar weighed on dollar-priced commodities, however, with the US currency hitting a 13-year high against a basket of currencies.