Venezuela's President Nicolás Maduro
Venezuela's President Nicolás Maduro © Reuters

Oil prices rose on Monday after Venezuela said Opec countries and those outside the producers’ group were close to reaching a deal to stabilise global output.

Venezuelan President Nicolás Maduro said on Sunday an agreement could be announced as early as this month, sending Brent crude, the global benchmark, up $1 to $46.77 a barrel in late afternoon London trading.

Speaking at the end of a summit of the Non-Aligned Movement on Margarita Island, Venezuela, where diplomats discussed the oil market, he said a deal was imminent.

“We had a long bilateral meeting with [Iran’s president Hassan] Rohani. We’re close to a deal between Opec producer countries and non-Opec,” Mr Maduro told a news conference.

Venezuela, which is among the most economically fragile producer countries in the world, has been pushing for a deal to curb global oil production since prices began their protracted downturn in mid-2014.

A persistent glut has battered Venezuela’s state-led economy and since oil dropped below $30 a barrel earlier this year it has renewed attempts for joint action. Venezuela has often said it was close to reaching agreement.

Prices have recovered from the lows reached in January, but they have failed to sustain a rise above $50 a barrel as supply continues to outweigh demand. Opec countries are producing at record levels while demand growth has failed to meet expectations and output cutbacks outside of the cartel have slowed down.

The world’s leading energy bodies, including the International Energy Agency and Opec’s research arm, published reports last week saying the market will take longer to rebalance than hoped as oil stockpiles continue to rise.

Growing anxieties about the oil market surplus sent Brent crude lower by almost 5 per cent last week. Also weighing heavily on the oil price is a possible revival in Libyan and Nigerian crude oil production.

“Demand growth and non-Opec supply are not co-operating. The day when supply and demand will be in balance has once again been pushed back,” said David Hufton at London-based brokerage PVM. “Indeed, it is reasonable to ask if it will ever arrive.”

This will give talks between some of the world’s biggest producer countries in Algeria next week some urgency after a failed attempt for a production freeze in April. Opec kingpin Saudi Arabia, which has pumped at record levels over the past few months, said at the time it would not curb its output should regional rival Iran not take part.

Saudi energy minister Khalid Al Falih has said in recent weeks there is no hurry to limit output, although there is a possibility to do so in the future.

Mr Rohani, speaking on the sidelines of the conference in Venezuela, said this weekend Tehran supports any move to stabilise the global oil market. “Instability and falling oil prices are harmful to all countries, especially oil producers,” Mr Rohani said, according to Iran state news agency Shana.

But while he said Iran “welcomes any move aimed at market stability”, he added any deal should be “fair”. Iran has been boosting output to pre-sanctions levels and has refused to join any previous joint efforts saying it would not curb its production until it regained its lost market share.

Market observers have focused on stalling Iranian production growth at around 3.6m b/d. But Adam Longson at Morgan Stanley said this has “lulled the market into complacency”. Mr Longson warned the completion of a new pipeline and export terminal by year-end to export a new grade of crude could be bearish for the oil market.

Opec’s secretary-general Mohammed Barkindo this weekend sought to manage expectations about any production deal among the world’s biggest producers on the sidelines of an industry conference in Algiers between September 26-28.

He said while he was optimistic about the meeting any discussions will be consultations with no major decisions made. A separate extraordinary meeting of members would take place should a consensus emerge.

“The informal gathering was proposed as a move to having an extraordinary meeting with the aim of taking decisions to stabilise the market,” Mr Barkindo said.

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