In OPEC hotel, dealmaker’s gambit wins Saudi-Iran agreement

JAVIER BLAS & ANGELINA RASCOUET
Noureddine Boutarfa, the Algerian oil minister who hosted this week’s OPEC meeting, resorted to one of the oldest tricks in the dealmaker’s book: He put his fellow ministers in the same hotel in the middle of nowhere. The strategy worked.
Corralled on two f loors of the Sheraton Club des Pins Resort, a hotel with the appearance of a corporate headquarters about a 40-minute drive from central Algiers, representatives of the Organization of Petroleum Exporting Countries had little to do except talk to each other.

Boutarfa checked into one of the hotel’s suites so he could mediate between regional rivals Saudi Arabia and Iran. On Wednesday, he declared victory — OPEC agreed on the outlines of its first production cut in eight years. The details still need to be ironed out.

NEW MINISTER
In early May, Ali Al-Naimi retired after 20 years as Saudi oil minister. His successor, Khalid Al-Falih, wanted to make his own mark. He started by trying to repair his country’s relations within the organisation, particularly with Iran and Venezuela. He also encouraged ongoing back-channel conversations involving Qatar, Algeria, Russia and Iran. By the middle of August, Riyadh had determined that its strained economy needed a boost that higher oil prices could provide —certainly something higher than $50 a barrel.

AFTER SANCTIONS
But Saudi Arabia and Iran remained far apart. Riyadh wanted Tehran to freeze at a level of 3.6 million barrels per day, while Iran insisted on production of at least 4.2 million barrels. The gap narrowed in meetings in Moscow, Paris and Vienna. But a month ago, the difference between Saudi Arabia and Iran was still roughly 1 million barrels a day, about the same output of fellow OPEC member Algeria.

The final push came over the last 10 days, with a two-day secret meeting in Vienna involving senior Saudi, Iranian, Qatari and Algerian delegates. The officials didn’t manage to resolve all their problems, but they narrowed the gap between Riyadh and Tehran to about 600,000 barrels a day.

GAP CUT
By the time OPEC ministers gathered on Wednesday afternoon, the gap was cut to only 200,000 to 400,000 barrels a day. Five hours later, OPEC emerged with a deal: a production cut that set a target of 32.5 million to 33 million barrels a day, a little below current output. Brent prices surged, closing 5.9% higher.

The work isn’t done, however. The group, which accounts for nearly 40 percent of the world’s petroleum supply, will discuss details of the deal at its next meeting on Nov. 30 in Vienna. There are plenty of world-class hotels spread throughout the heart of the Austrian capital. Negotiators will need new tricks.