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08-04-2016

OPEC Predicts Successful Freeze Meeting - But Latin America Will Discuss the Proposal Beforehand Anyway

Ecuador, Colombia, and Venezuela will try to reach a joint position on April 8.

Although the April 17 meeting between Organization of the Petroleum Countries' (OPEC) members and non-members to curb oil output and rebalance the market is widely considered doomed due to Iran and Saudi Arabia vowing not to play ball, Latin American countries are congregating ahead of the meeting to reach a joint position, according to various media reports.

Rafael Correa, president of Ecuador, said representatives of his country, Colombia, and Venezuela will meet on April 8 to discuss the proposed freeze.

In comments circulated by the government news agency Andes, Correa said an agreement among other producers to freeze output without Iranian participation would be enough to stabilize oil prices in the short term: "If we see that more has to be done, then with a first agreement to a freeze the doors will open to later reduce production a bit."

Although Correa has in the past argued for crude output cuts between 2 and 5 percent, he noted that Iran's determination to escalate production to pre-sanction levels "is the correct thing."

It is unclear exactly what influence the pre-emptive meeting of Latin producers would have on the April 17 summit, but if predictions made by Nawal Al-Fuzaia, Kuwait's OPEC governor, prove true, it could be a total waste of time.

That's because Al-Fuzaia believes the much-maligned member/non member meeting will be a success: "There are positive indications an agreement will be reached during this meeting ... an initial agreement on freezing production," she said earlier this week in a speech at Kuwait's oil ministry.

Al-Fuzaia did not, however, discuss what signs point to an agreement.

The governor's conviction is echoed by two OPEC delegates, one of whom told Reuters, "Yes, there will be a deal; the freeze will be done."

Meanwhile, U.S. crude prices that of late climb or fall at the merest mention of a possible freeze or cut surged 5.18 percent on Wednesday - but this time the surge was attributed to the American government reporting an unexpected draw in domestic crude stockpiles.

Last week, Deputy Crown Prince Mohammed bin Salman of Saudi Arabia's remark that his country will not agree to any freeze unless Iran and other major producers do so caused U.S. oil to plummet 4 percent to $36.79 per barrel.


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