UAE says backs output freeze to support oil markets

The United Arab Emirates said on Monday it would back a global freeze in oil output to bolster prices, while some OPEC delegates predicted a meeting of producing countries in Algeria this week could still yield a deal to restrain supply.

Oil prices have more than halved from 2014 levels due to a glut, prompting OPEC producers and non-OPEC Russia to seek a market rebalancing that would boost revenues from oil exports and help their crippled budgets.

The predominant idea since early 2016 among producers has been to agree to limit output, although market watchers have said such a move would fail to reduce oversupply.

Sources told Reuters last week that Saudi Arabia had offered to reduce its output if Iran agreed to freeze production, a shift in Riyadh’s position as the kingdom had previously refused to discuss output cuts.

However, oil markets fell on Friday as hopes for a comprehensive deal in Algeria faded, with sources saying the informal meeting was meant only to build consensus ahead of formal OPEC talks in Vienna at the end of November. Crude prices recovered on Monday in volatile trade.

As delegations gathered in Algiers, some ministers and officials expressed hope that a deal would emerge this week.

“If all members of OPEC are in agreement around a decision, I think there is a high likelihood of getting the support of the others, especially Russia,” UAE Energy Minister Suhail bin Mohammed al-Mazroui told Reuters.

“For us in the UAE, we are for a decision. We think a freeze will help if it is agreed. We hope that all are going to agree.”

A non-Gulf delegate said: “We hope there will be a production freeze. We expect there will be a pre-agreement”.

The focus was on trying to persuade Iran to freeze production at levels acceptable for the rest of the Organisation of the Petroleum Exporting Countries, another delegate said.

Iran’s production has been stagnant at around 3.6 million barrels per day (bpd) in the past three months, close to what the country produced before the imposition of European sanctions in 2012.

The sanctions were eased in January 2016, and Iran has said it wants to achieve output of more than 4 million bpd.

Iranian agency SHANA quoted the country’s oil minister, Bijan Zanganeh, as saying the meeting in Algiers was only “advisory” and expectations should be modest.

Members of OPEC will meet on the sidelines of the International Energy Forum, which groups producers and consumers, from Sept. 26-28. Russia is also attending.