With just a day to go before a critical OPEC summit, most producers made clear they agree on the need for a cut in oil production, without explaining how they’ll turn that desire into a reality. Preparatory talks between Saudi Arabia and Russia on Wednesday yielded no breakthrough, putting pressure on both to push for a deal at a wider meeting later in the day.
The stakes are high after prices suffered their largest monthly drop since the financial crisis in November, while Trump resumed his public pressure on the cartel, saying in a tweet that the “world does not want to see, or need, higher oil prices!"
Oil prices were little changed by the president’s intervention, rising 21 cents to $62.29 a barrel in London.
“There is little disagreement among OPEC members over the need to cut, but there is not yet consensus over how much," said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “Communicating a large cut, if one can be agreed upon, will still be fraught with challenges given complicated US-Saudi relations."
In an interview on Tuesday, Saudi Energy Minister Khalid Al-Falih said it was “premature" to suggest the OPEC+ group — which includes allies Russia and Kazakhstan — would agree to curtail output. That’s less bullish than his call a month ago for 1 million barrels a day of cuts. Crude gave up much of its gains on Tuesday following his comments, and fell on Wednesday.
Russian Energy Minister Alexander Novak said his discussion with Al-Falih on Wednesday morning was “good," but added there’d be more talks ahead for OPEC+ members. Al-Falih subsequently met Gulf producers including Kuwait, Iraq, the United Arab Emirates and Oman as he worked to reach a consensus.
“I think we will get a deal," said Mohammed Al Rumhy, oil minister of non-OPEC member Oman, adding that Venezuela, Nigeria, Libya and Iran need to be exempted from making any cuts.
Iran is currently subject to US sanctions and as such won’t participate in any curbs, the country’s OPEC governor Hossein Kazempour Ardebili said this week. US special representative for Iran Brian Hook met with Al-Falih in Vienna on Wednesday, according to a person familiar with the matter.
The last time the OPEC+ group agreed to curtail output, in late 2016, it settled on a combined 1.8 million-barrel-a-day reduction. In preparatory meetings ahead of this week’s summit, delegates have said a cut of as much as 1.3 million barrels a day next year is needed as demand growth slows and US shale production surges.
The opportunity for countries to put their cards on the table comes later Wednesday at the Joint Ministerial Monitoring Committee, the panel that oversees the 2016 deal. Both Al-Falih and Novak will attend that meeting, a day ahead of the full OPEC gathering on 6 December.
OPEC+ is discussing possible output curbs for three to six months, Oman’s Al Rumhy told reporters in Vienna. But sticking points remain.
In private conversations, OPEC delegates have said that Russia and Saudi Arabia still differ on how to share the cuts. Saudi Arabia has argued that Russian proposals implying a cut by Moscow of as much as 150,000 barrels day would leave the kingdom shouldering too much of the burden, and insisted there should be a more equal partnership, people familiar with the talks said.
Discussions also continue on the baseline for any reduction. Some nations want to have it at October output levels while others prefer sticking to the original deal, which used 2016 levels as the base.
It’s complicated further by Saudi Arabia and Russia having lifted their production to near-record levels in recent months. The kingdom is currently pumping 11 million to 11.2 million barrels of oil a day, Al-Falih said.
Any final decision will need the blessing of Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, who agreed over the weekend to extend their oil-market cooperation.
Trump also plays an important role. He’s waged a Twitter campaign against OPEC, demanding producers keep pumping to bring down gasoline prices for US consumers. Saudi policy makers may be reluctant to go against him after the murder of Jamal Khashoggi unleashed a fusillade of criticism from American lawmakers, leaving the president as one of Prince Mohammed’s few remaining allies in Washington.
OPEC’s work has, however, been made easier by Canada, where the oil-rich province of Alberta this week announced output curbs of 325,000 barrels a day because of a pipeline bottleneck. That may allow OPEC to deliver a smaller-than-planned reduction while dressing it up as a significant cut.
United Arab Emirates Energy Minister Suhail Al Mazrouei told reporters in Vienna on Tuesday that he’s optimistic all countries will join in the OPEC+ agreement.
“I’m hopeful that everyone in and even outside the organization will be supportive to whatever requirements we need to do to balance the market," he said. “The objective is to balance the market and currently we have seen that there’s a requirement for an adjustment."