OPEC Plans Production Cuts to Push Oil Price Up from $80

Crude prices plunged into a bear market this year amid the highest U.S. oil production in more than three decades and speculation that Saudi Arabia wouldn’t cut output in response to a surplus. Oil-market analysts are perfectly divided on whether OPEC will cut output when it meets on Nov 27, or leave it unchanged.

OPEC is considering exemptions for three nations from any potential oil-production cuts, two people with knowledge of the proposal said. Saudi Arabia’s oil minister said he doesn’t anticipate a difficult meeting when the group meets on Nov. 27 to decide its response to slumping crude.

Iraq, Iran and Libya wouldn’t have to reduce supplies should the Organization of Petroleum Exporting Countries agree to cut output at its gathering in Vienna, according to the people, who asked not to be identified in line with their national policies. Ali Al-Naimi, Saudi Arabia’s oil minister, told reporters in the Austrian capital that it’s not the first time the oil market has been oversupplied.

Brent crude futures slumped to a four-year low of $76.76 a barrel on Nov. 14. Futures fell 9 cents, or 0.1 percent, to $79.59 on the London-based ICE Futures Europe exchange.

Russian Response

Russia’s energy minister said yesterday his country hasn’t decided to cut oil production as he prepares to meet with OPEC ministers to discuss the crude market. Russia is already helping to balance the oil market by keeping output steady, Alexander Novak said in an interview with state TV channel Rossiya 24. There’s only a small chance that OPEC will agree to reduce output at this week’s meeting, he said.

Iraq, the second-largest producer in OPEC, plans to almost double oil production to 6 million barrels a day by 2017. It pumped 3.2 million barrels a day this year.

The country’s industry is bouncing back from decades of war and underinvestment that caused production to decline from 2.6 million barrels a day in 2000 to 1.4 million in 2003, the year the U.S. invaded and deposed Saddam Hussein, the data show.

Since 2012, Iran and Libya have been the biggest source of supply disruption in the global oil market, Societe Generale SA said in an e-mailed report.

Libya, holder of Africa’s largest crude reserves, produced an average of 437,000 barrels a day of oil this year. That’s less than a third of the 1.55 million a day produced in 2010, before the rebellion that ended Muammar Qaddafi’s 42-year rule. Political divides and violence have intensified amid a lack of central authority since the uprising, undercutting efforts to restore production.

Iran Sanctions

Iran’s oil production is curtailed by U.S. and European sanctions aimed at pressuring the country over its nuclear program. The Persian Gulf state pumped an average of 2.8 million barrels a day this year, down 23 percent from 3.6 million in 2011, the year before tighter sanctions were imposed.

Envoys representing Iran and a group of world powers agreed to extend nuclear talks until July after failing to overcome differences at negotiations in Vienna. Officials didn’t immediately say how extending talks would affect the November 2013 interim pact that restricted some Iranian nuclear activities in exchange for limited sanctions relief.