Published: Fri, December 07, 2018
Finance | By Kristine Clayton

Saudi Arabia works on convincing Russian Federation to join oil cuts

Saudi Arabia works on convincing Russian Federation to join oil cuts

PRICE Futures Group's Phil Flynn on the outlook for oil prices.

The Organization of Petroleum Exporting Countries (OPEC) in its meeting today weighed the prospects of facing an over-supplied crude oil market in 2019, along with a slow-down in oil demand, Suhail Mohamed Al Mazrouei, Minister of Energy and Industry at UAE and President of the OPEC conference said in Vienna today.

"We're looking for a sufficient cut to balance the market, equally distributed between countries", Khalid al Falih told reporters ahead of an OPEC meeting in the Austrian capital. We have to get the non-OPEC countries on board.

Iraqi Oil Minister Thamer Ghadhban said Iraq, which is OPEC's second-largest producer behind Saudi Arabia, would support and join a cut.

OPEC meets in Vienna on the verge of an oil production cut that would defy U.S. President Donald Trump's plea to keep the taps open.

"We are hopeful that they will come around this time and understand that everyone has to cut together", an OPEC delegate said, asking not to be named.

But he said: "We are hopeful that an agreement can reached".

According to Ardabili, "the five or six countries which have benefited from the situation should slash their output by 1.4 million to 1.8 million barrels per day at the minimum in order to return prices to an upward trajectory".

The uncertainty over possible production cuts caused oil prices to dip on Wednesday as investors wait on a decision.

Oil prices skid amid global stock market slump, swelling US supply
OPEC members expected to agree oil production cut

This was the first drop in USA crude stocks since September, and it came as exports surged to a record 3.2 million barrels per day (bpd).

Possibly complicating any Opec decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October. The alliance has transformed OPEC into a duopoly in which Russian Federation, which isn't a formal member of the cartel but part of the production cuts alliance, is asserting its power. USA senators say, after a briefing with intelligence services, that they are convinced Saudi Arabia's de-facto ruler, Crown Prince Mohammed bin Salman, was involved in Khashoggi's death.

The US "is not in a position to tell us what to do", he added.

His comments came after Iran's Oil Minister Bijan Zangeneh said Tehran will not involve itself in any deal over OPEC production levels as long as it remains under the illegal United States sanctions.

Qatar, a Saudi rival and Iranian ally, said this week it would leave OPEC in January.

A source close to the Russian Energy Ministry said: "No one is eager to cut unless there is an emergency". It comes just three years after the United States ended a four-decade moratorium on exports of its crude oil.

OPEC members will also have to contend with Iran.

Iran has said it is carefully monitoring the next steps by some OPEC members and their allies which have "arbitrarily" ramped up oil production, leading to a crash in prices.

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