Saudi Arabia, the de facto leader of OPEC, insisted on their inclusion saying Iran might use the opportunity to gain market share that could erode the position of other members but mainly itself. Iran countered by saying it had been sanctioned from trading its oil with the rest of the world and was in the process of mending its trade balance that had suffered badly as a result.
The dispute between the two threw the power of OPEC into jeopardy by opening the door to retaliatory attacks against one another with Riyadh going as far to say to would increase oil output to record highs in a veiled threat intended to undermine Tehran.
But along came Russian oil minister Alexander Novak who suggested his country was open to revisiting the prospects of negotiating a production freeze after a meeting held in April between them and OPEC members fell through leaving producers in limbo. Novak said OPEC could possibily use an upcoming informal meeting between members to discuss the way forward.
This revived up the bulls although only for a little while as the bickering flared up with Saudi Arabia proudly announcing it had reached an all time high in oil production for the month of July. The on and off commentary that's been swirling around since Novak made the comments has driven uncertainty off balance and dissuaded participants from taking a view on either direction.Putin Joins "OPEC Headline" Fray, Pushes For Oil Production Freeze https://t.co/Nx725kAdzO— zerohedge (@zerohedge) September 2, 2016
However things look set to get interesting with Russian president Vladimir Putin adding his voice to the debate and throwing his weight behind reaching a deal without the inclusion of Iran. He went further to express empathy for Tehran saying the country has increased oil production from a low base and the effects of generating profits through oil revenue would be an added boost to its economy.
I've stated previously in the past that Saudi Arabia had abused its position in OPEC to suit its own economic needs while overlooking the distress in of others inside the group and it's bullyboy tactics threaten to tear apart the organisation with the possibilities of members "cheating" on the agreement to see higher oil prices.
Needless to say, Russia's support for Iran gives confidence to those who are of the belief that a production freeze is likely because it pits two giant oil producing nations against one another without creating conflict within the organisation. Russia may not form part of OPEC but the combination of their supply with that of OPEC equates to roughly 50% of the world's oil supply. Their participation in the deal is an absolute necessity for both OPEC and themselves.
And in saying this, Moscow can't afford to slip back on the economic work its done in alleviating the hardship suffered from its own sanctions imposed by the West after it annexed Crimea. Optimally it would benefit greatly if oil prices sat above $60 yet we still need to see them retain those levels with a degree of certainty that they'll stay above there.
A leader as powerful as Putin weighing in on the debate highlights the urgency of finding resolve in the current environment.
