OPEC and its allies are expected to agree on the terms of price-boosting output cuts, despite pressure from President Donald Trump to reduce the cost of crude.
The influential oil cartel is meeting at its headquarters in Vienna, Austria on Thursday with the aim of reaching an accord over production levels for the next six months. The 15-member organization will then hold talks with allied non-OPEC partners on Friday, with markets widely-expecting the energy alliance to announce steep output reductions from January.
The much-anticipated meeting comes at a time when the oil market is near the bottom of its worst price plunge since the 2008 financial crisis. Oil prices have crashed around 30 percent over the last two months, ratcheting up the pressure on budgets in oil-exporting countries.
Who wants what?
OPEC kingpin Saudi Arabia has been leading calls for the group to trim output, amid surging supply and fears that an economic slowdown will erode fuel demand.
The oil-rich kingdom has previously indicated it wants the group to curb output by at least 1.3 million barrels per day.
However, Saudi Arabia’s Energy Minister Khalid al-Falih told reporters Thursday morning that an output cut of 1 million barrels per day would be sufficient for OPEC and its allied producers. That prompted international benchmark Brent crude and U.S. West Texas Intermediate (WTI) to fall more than 4 percent, as energy market participants feared the energy alliance would only manage to impose measures at the bottom end of expectations.
Brent was trading at $58.98 a barrel at around 10:30 a.m. London time, while WTI stood at $50.71.
Ahead of the meeting, the likely outcome was OPEC and non-OPEC members would agree to a supply cut of around 1 million to 1.4 million barrels per day. As always though, the hard part for the energy alliance is not figuring out a number, but rather how the group divvies up the cuts.
Russia has appeared reluctant to sign off on a reversal in production strategy. The non-OPEC heavyweight has warned the energy alliance must tread carefully this week to ensure it does not change course by 180 degrees whenever it meets.
On Thursday morning, OPEC was thought to be waiting on Russia before deciding the exact level of production cuts. Five unnamed delegates told Reuters ahead of the meeting that the group’s preferred level of supply cuts would effectively be conditional on Moscow’s contribution.
Trump urges OPEC to leave oil flows ‘as is’
OPEC began managing crude supply in partnership with Russia and several other nations last year in order to end a punishing downturn in oil prices.
The Middle East-dominated group produces around 40 percent of the world’s oil and has a long history of adjusting production to guide the energy market.
The energy alliance’s policy of capping output has drawn particular ire from Trump.
“Hopefully OPEC will be keeping oil flows as is, not restricted. The world does not want to see, or need, higher oil prices!” Trump said in a tweet on Wednesday.
The U.S. president is publicly in favor of low fuel prices and has urged Saudi Arabia to drive crude futures even lower at OPEC’s final meeting of the calendar year.
OPEC’s de facto leader Saudi Arabia comes into the meeting badly bruised by revelations that agents of the kingdom murdered Washington Post columnist and U.S. resident Jamal Khashoggi in October.
Trump is standing by his allies in Riyadh, but he’s made it clear he wants the Saudis to keep a lid on oil prices.