Algeria has written to cartel's secretariat and others are piling pressure on Saudi Arabia over production
Several countries within the 12-nation oil cartel Opec are calling for changes to help reverse a dramatic oil price slide that has pushed some members to the brink of bankruptcy.
The Wall Street Journal reports that Algeria has written to the bloc's secretariat "complaining oil prices have sharply declined since the group decided to keep its ceiling unchanged at a meeting in June". It is thought he letter didn't go as far as calling for an emergency meeting or a production cut, which would be the most effective way to reverse the current slump.
The Daily Telegraph says that other members are also vocal in their criticism of a strategy that allows Saudi Arabia to produce a third of Opec's targeted total output and is contributing to a global production surfeit far in excess of demand. It says Opec's secretary general, Abdulla Salem el-Badri, "has spoken to Saudi officials on behalf of members".
In June Opec voted to keep production at 30 million barrels per day. According to the Financial Times it actually produced 31.5 million barrels a day in July, but demand for the cartel's crude this year is "forecast at only 29.2m" barrels. Saudi Arabia in particular is keen to maintain market share in the face of increased production in the US and Canada. A looming increase in output from Iran if and when sanctions are lifted is set to make matters even worse.
Brent crude is tumbling towards its January 2015 low of $45, and was down 2.3 per cent on Friday in London to $45.55 a barrel.
According to the International Monetary Fund, Algeria needs prices at $121 a barrel to cover its state spending plans, which an RBC analyst told the Journal "remains key for social stability". Venezuela and Nigeria are on the brink of bankruptcy, while Gulf states are having to prop up revenues from cash reserves, although in the case of Saudi Arabia these are extensive.