Oil prices paused Wednesday after three consecutive days of gains as news from an OPEC meeting pointed to lingering differences among cartel members negotiating production cuts due to be delivered at the end of the month.
West Texas Intermediate for delivery in January was unchanged Wednesday at $48.00, marginally below its Tuesday close. Brent crude for delivery in January traded at $49.06 Wednesday morning, down 6 cents, having touched lows of $48.84 earlier in the session.
Proposals presented at an OPEC technical meeting on Tuesday called for both Iraq and Iran to agree production cuts as part of the oil producing group's wider plans to reduce output by about 5% to between 32.5 million and 33 million barrels per day, according to reports. That is at odds with the countries' long-held position that they should be exempt from the cuts.
"As it stands today, the proposal pushes for production cuts from Iran and Iraq (albeit from potentially higher levels), both of whom have thus far argued for exemptions, whilst OPEC members want Russia to play a larger part in the deal and join in cuts," noted Goldman Sachs on Wednesday. "This should all be seen as negotiating tactics, but highlights that the deal is far from done."
Iraq has claimed that the necessity of funding its fight with militants in the north of the country means it should be allowed to increase its production. Iran insists that it should be allowed to maintain or increase production to return to levels achieved before the imposition of sanctions on the country that were lifted in January.
Iran and Iraq together account for just under a third of OPEC's output. Their exclusion from production cuts would heap much of the burden onto Saudi Arabia, which could balk at bearing the brunt of lost sales while regional rivals gain from the resulting price increase. Analysts have tipped oil prices to rise to nearly $55 a barrel if a deal can be agreed and warned of falls if the cuts fail to materialize.
There has also been disagreement over the estimates of oil output from member countries. OPEC is seeking to impose its estimates based on "secondary sources," while countries have promoted their official production estimates, which tend to be higher.
For example, OPEC is thought to be asking Iran to cut its output by about 4.5% from just under 4 million barrels per day of production, while Iran insists that it is producing 4.1 million to 4.2 million and that any reduction should start from that level, according to a Reuters report that cited unnamed sources.
Iraq's oil minister Jabbar Al-Luaibi has insisted his nation should be allowed to maintain its September output of 4.7 million barrels per day. OPEC believes that the real production figure was less than 4.5 million barrels per day.
OPEC's next official meeting is on Nov. 28,when members will speak with non-OPEC oil producers including Russia, the world's biggest oil producer. The official OPEC meeting, and deadline for the production cut agreement, is Nov. 30.