By Benoit Faucon, Christopher Alessi and Summer Said 

ALGIERS, Algeria -- OPEC producers largely agree that oil prices above $80 a barrel would be too high. But there is widespread disagreement on how the cartel and its allies should contain crude prices once U.S. sanctions banning Iranian oil sales take effect in November.

The lack of a consensus highlights inequities between oil-producing countries that can boost output beyond current levels and those that can't. The former group would like to see a rise in demand. The latter prefer higher oil prices.

At a gathering of the cartel and nonmember producing nations here on Sunday, Saudi Arabia, the de facto leader of the 14-member Organization of the Petroleum Exporting Countries, and Russia, which leads 11 other allied producers, reiterated that they want to adhere to production quotas to which they agreed in late 2016.

But sticking to those limits would mean an extra 500,000 barrels a day would flow into global markets to compensate for expected declines once the Iran sanctions take effect and as Venezuela's economic crisis continues.

"Every extra dollar on the oil price eases their pain," said Richard Mallinson, geopolitical analyst at consultancy Energy Aspects, of struggling OPEC producers including Libya, Angola, Algeria, Nigeria and Venezuela. "The only way those countries can ease their economic pressure "is by hoping for, pushing for a higher price," he said.

Any extra supply would need to come from Saudi Arabia and other Persian Gulf countries, along with Russia. Thanks to years of investment and relative stability, those countries can generate the revenue they desire by offsetting lower prices with increased production.

By maintaining official limitations, the alliance will keep a floor for oil prices, which have recently hovered between $70 and $80 a barrel. That will benefit African countries such as Angola and Nigeria, as well as others including Iran and Venezuela, which benefit from higher prices because of an inability to increase output after years of bureaucratic and political challenges.

These differences are expected to complicate talks between OPEC members and nonmembers. Meanwhile, President Trump last week urged the group to churn out more oil to keep prices lower, tweeting "The OPEC monopoly must get prices down!" on Thursday.

The group must decide whether to keep the current system of allocating individual production limits into next year or allow countries to bring as much oil as they want to market. Countries that can pump more like Saudi Arabia are considering giving more leeway on such restrictions. Others with restrained capacity disagree.

One of the nations opposed to a production free-for-all is Algeria. Few OPEC members exemplify the divide better than the host nation of this weekend's summit. A lack of quotas means "some producers can increase as they want while others can't," Abdelmoumen Ould Kaddour, chief executive of state oil company Sonatrach, told the Wall Street Journal.

Algeria is struggling to capture the benefits of oil prices currently near $80 per barrel. It depended on hydrocarbons for 96.1% of its export revenue last year, according to an International Monetary Fund report released in June. Despite rising prices, unemployment rose to 11.7%, inflation remained at 5.6%, the IMF said. Meanwhile, the country's international foreign reserves have halved since 2013, falling to $96 billion at the end of 2017.

In September 2016, the country spearheaded talks within OPEC to cut output as prices crashed under the weight of mounting U.S. supply. Algeria's need to maximize revenue on each of the million barrels a day it pumps explains its active support for the effort, said Richard Mallinson, geopolitical analyst at consultancy Energy Aspects. It and the rest of the cartel later brought Russia and others into the deal, engineering a quick recovery in oil prices.

This weekend's meeting was a major event for Algeria. Soldiers in immaculate white uniforms played the national anthem as delegates attended a ceremony honoring 81-year-old President Abdelaziz Bouteflika.

The IMF reported that Algeria's deficit is widening as the government raised spending on housing, roads and other infrastructure. Critics say the extra revenue earned from production curbs is merely assuaging tensions over Mr. Bouteflika's 19-year rule.

Outside the conference facilities, state-employed electrician Mohamed, 47, said he has to moonlight as a taxi driver to help make ends meet. His job pays the equivalent of $213 a month.

The extra earnings from $70-plus per barrel oil have gone toward nonproductive spending more than diversifying beyond oil, said Soufiane Djilali, president of opposition party Jil Jadid, Arabic for New Generation. "It's just giving a breath of fresh air to the regime."

Neil Atkinson, head of the International Energy Agency's oil industry and markets division, said similar pressure to keep prices high were being shared by other OPEC countries that are lower producers and high spenders.

Venezuela is perhaps the worst example with years of mismanagement leading to scarcity of goods, skyrocketing inflation and power cuts that hurt its oil production.

"We fear Venezuela is our destination" once cash reserves have run out, said Mr. Djilal, the Algerian opposition politician.

Sonatrach's Mr. Ould Kaddour, whose company is the biggest in Africa by revenue, said he has initiated deep cost-cutting as part of a plan to boost income by $68 billion by 2030. Some of that cash will come from ending costly oil-product imports following the purchase of an Italian refinery and investments in plants at home, he said.

Sonatrach's home country hasn't shown similar discipline. In addition to overspending, Algeria has often suffered from a business environment too difficult to attract significant investment in oil and gas fields and other sectors. Production in Angola, for instance, has stagnated because oil majors have stopped investing in its costly, highly bureaucratic environment.

Delegates from countries like Algeria will likely have these issues in mind as they try to reach consensus with OPEC and other oil-producing allies on quotas.

Write to Benoit Faucon at benoit.faucon@wsj.com, Christopher Alessi at christopher.alessi@wsj.com and Summer Said at summer.said@wsj.com

(END) Dow Jones Newswires

September 23, 2018 18:20 ET (22:20 GMT)

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