While its interesting that OPEC's two largest producers, and regional adversaries, met in Vienna at OPEC headquarters prior to the meetings in Algiers, it would be optimistic to think that Saudi Arabia and Iran will agree on any type of production freeze. Recall, OPEC's last bid for a production freeze in April was subsequently derailed due to Iran not agreeing to participate, essentially reaffirming its rivalry with Saudi Arabia. On the positive side, these informal talks do signal that diplomatic efforts to secure a meaningful deal in Algiers are at least under way. Also, OPEC Secretary-General Mohammed Barkindo visited Qatar and Iran earlier in September to build consensus before the Algiers conference. Further, Russian President Vladimir Putin noted earlier in the month that the producers can overcome their divisions to reach a deal. Finally, Iran has now almost fully restored lost output to pre-sanction levels and may be more receptive to a production freeze. At the very least, these recent developments suggest that the overall environment in Algiers appears to be more conducive to reaching a deal than ever before.
While all of this sounds promising, the reality is a number of obstacles to securing an agreement still remain, most notably the tensions between Saudi Arabia and Iran as they continue to clash in proxy conflicts around the region from Syria to Yemen. Further, OPEC also remains locked in a contest for market share, both between members and with competitors outside the group (i.e. Russia and U.S. shale drillers), making a deal very difficult. So, while the Algiers meetings may look promising on the surface, most market watchers are likely not holding their collective breaths for any potential OPEC deal later this month.
A Canadian Energy expert