zerohedge.com / by Tyler Durden / Sep 8, 2016 1:50 PM
With oil prices surging on the ‘one-off’ crash in US inventories (as algos run riot once again), overnight remarks from Iran, largely dashing hopes of any freeze agreement in Algiers at the end of September appear to have been forgotten. However, after two years of a Saudi-led strategy of all-out pumping, adopted to protect market share against the surge in U.S. shale oil, OPEC and Russia are putting cooperation back on the table. Their last attempt to do this – a proposal to freeze output in April – collapsed inacrimony because of rivalry between Saudi Arabia and Iran.
As Bloomberg’s Angelina Rascouet details, there may be four potential outcomes from the Algiers talks…
1. Production Freeze
A freeze in production by OPEC and Russia would be the most effective way of stabilizing the market, Alexander Novak, the Russian energy minister, said in a joint press conference at the G-20 summit in China with his Saudi counterpart on Sept. 5. Novak said his country is ready to cap output at the level of any month in the second half of this year, a period that so far has delivered record volumes from both Russia and OPEC.
A freeze at July levels, the most recent month for which data is available, would mean OPEC keeping production at 33.4 million barrels a day, roughly in line with demand for the group’s crude in the fourth quarter, according to data from the International Energy Agency. The Paris-based adviser already expects Russia to hold output steady for the rest of this year and into 2017.