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Currency analyst

OIL: key info ahead of the International Energy Forum

The next International Energy Forum (IEF15) will be held in Algeria on September 26-28.

The Forum is perhaps the largest recurring gathering of senior energy officials from consuming and producing countries of the IEA and OPEC, and from other major energy players – Argentina, China, Mexico, Oman, Russia, South Africa, India. The IEF aims to foster mutual understanding and awareness of common energy interests among the participants and to ensure global energy security.  

All of the aforementioned countries have confirmed their intention to participate in this meeting. Earlier it was reported that an informal meeting of oil-producing countries is going to be held on the sidelines of the IEF conference. According to Bloomberg, it could take place on 28 September. It is expected that this meeting will define the framework of the talks on freezing oil prices. The Doha negotiations held earlier this spring were not successful, in part because of disagreements within OPEC. A freeze would be the group’s first decision to limit output since OPEC adopted a Saudi plan in 2014 allowing members to produce more crude oil to protect their shares on the market.

So far large players keep trying to convince the market that a deal to freeze prices is possible. For instance, Iraq's governor to Opec Falah Alamri said that market circumstances were right for oil producers to seal an output freeze deal. Iran's President Hassan Rouhani said Tehran supports any move to stabilize the global oil market and lift prices. Russian Deputy Energy Minister Kirill Molodtsov said that the county can "in theory" reduce its oil output by 5%, though no formal agreement with Russian firms has been reached. However, these comments may be nothing more than attempts to provide verbal support for the prices. 

                

 Iraqi governor to Opec Falah Alamri       Iranian President Hassan Rouhani 

        

Russian Deputy Energy Minister Kirill Molodtsov        Opec secretary general M. Barkindo​

Key rivals Saudi Arabia and Iran met in Vienna on Thursday. Oil freeze talks in April failed mainly because Iran wanted to keep increasing output. Since then the nation managed to push its crude production back up the level it was at before sanctions were imposed on it in 2012. As a result, Iran may be more cooperative this time. 

All in all, according to Opec secretary general Mohammed Barkindo, next week’s meeting would be used for "consultation" and not for decision making. Still, if there is a consensus, OPEC members may call an extraordinary meeting, said Barkindo.

As a result, the baseline scenario is that no decision emerges from the Algeria meeting, but the biggest oil producers may develop some kind of agenda for future talks.

Oil prices remain under pressure due to weak refinery margins, considerable rise of supply and the impact of the UK referendum on the crude oil futures market. At the same time, Brent managed to recover this week from the key level of $45 and gain about $2 as US crude oil inventories fell by 6.2 million barrels making the second biggest decline in a year.

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