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Self Interest Likely to Scupper OPEC Oil Output Deal at June Meeting

© AFP 2023 / MARWAN NAAMANIAn Asian worker covers his face to protect it from the dust and the blazing sun at the site of Saudi Aramco's (the national oil company) Al-Khurais central oil processing facility under construction in the Saudi Arabian desert, 160 kms east of the capital Riyadh (File)
An Asian worker covers his face to protect it from the dust and the blazing sun at the site of Saudi Aramco's (the national oil company) Al-Khurais central oil processing facility under construction in the Saudi Arabian desert, 160 kms east of the capital Riyadh (File) - Sputnik International
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Oil-producing nations are unlikely to agree on curbing oil output at the next Organization of the Petroleum Exporting Countries (OPEC) meeting in early June to be held in Vienna due to the remaining political differences among its participants and their desire to protect own interests, analysts told Sputnik.

Oil workers are seen at the Khurais oil facility in an area where operations are being expanded, about 60 miles southeast of Riyadh, Saudi Arabia (File) - Sputnik International
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MOSCOW (Sputnik), Anastasia Levchenko — In mid-April, sixteen OPEC member countries and non-cartel producers failed to reach an agreement in Qatar on freezing the oil output at January 2016 levels. Analysts blamed Saudi Arabia's regional rivalry with Iran for the failure.

Saudi Arabia continues to insist that Iran, which only recently reappeared in the energy market after years of international sanctions, should be part of any production cuts.

"The chances of a production cut are fairly slim. Saudi Arabia is the key [player], and if Iran plans to continue to increase its output, Saudi Arabia will continue [boosting production levels as well] as they have been," Denton Cinquegrana, the chief oil analyst at Oil Price Information Service (OPIS), said.

Iran is now aiming to increase oil production to the level that existed before the introduction of the embargo against the country.

"OPEC is quite disjointed, as the biggest producers, Saudi Arabia, Iraq, and Iran, continue to operate in their own best interests. There are fundamental and political differences among them, which also makes agreeing to anything quite difficult. We see little prospect for an agreement on output occurring at the June meeting," Anthony Starkey, the energy analysis manager at Bentek, a unit of the Platts information provider, told Sputnik.

Workers repair pipes at the Yanlian Oil Refinery in Yan'an, 25 May 2005, north of Xian in western China's Shaanxi province - Sputnik International
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Both experts agree that the fall in oil prices will not be drastic. The falling dollar will help keep oil prices from dropping too much.

"We believe oil prices will be largely rangebound between $40-$45 ahead of the June OPEC meeting," Starkey noted.

On Monday, oil prices slid back from 2016 peaks given the rising production in the Middle East and a falling dollar.

The Brent crude price now stands at $46.28 per barrel, as of 15:00 GMT.

Analysts also concur that OPEC economies are upscaling output volumes, being heavily dependent on oil revenues and trying to compensate for the loss in price.

"Due to the low price environment, countries that depend on 'petrodollars' have to produce as much revenue as possible. So to make up for low prices, producers are putting more on the market. They are also using the production and low price environment to make a run at more market share," Cinquegrana explained. 

​Global oil prices plunged from $115 to less than $30 per barrel between June 2014 and January 2016, hitting their lowest levels since 2003 amid an ongoing glut in global oil supply.

The oil output freeze was first proposed at a Doha meeting of OPEC’s Saudi Arabia, Qatar, and Venezuela with Russia in February, in an attempt to reduce the supply glut that has pushed oil prices downward.

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