OPEC has reportedly agreed to cut oil production, but the cartel is not releasing details of the deal until it reaches an agreement with allied producers including Russia.
The influential OPEC 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 including Russia on Friday.
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.
The group has agreed in principle to reduce its output, two sources told Reuters on Thursday. However, OPEC may not announce specific production levels until Friday, after it meets with non-OPEC oil producers, the Dow Jones reported, citing delegates.
Saudi Arabia, OPEC’s largest producer, signaled earlier on Thursday that the group may throttle back production less than the market expected. Meanwhile, Russia’s participation remained an open question, as Moscow has refused so far to commit to a specific production quota.
Complicating matters further, U.S. President Donald Trump on Wednesday renewed his call for OPEC to keep production steady and reduce the cost of crude.
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 bpd would be sufficient for OPEC and its allied producers. That is in part because Alberta, Canada announced this week it would require producers to cut output by about 325,000 bpd to drain the province’s brimming crude stockpiles.
“The number that we need is going to be less than 1.3 [million]. Is it a million? Is it slightly less, slightly more? We have all day today and some of tomorrow to determine those numbers,” Falih said.
That prompted international benchmark Brent crude and U.S. West Texas Intermediate 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 $59.94 a barrel, down 2.6 percent, at around 9:30 a.m. ET (1430 GMT), while WTI stood at $51.21, down 3.2 percent.
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 bpd. 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.
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 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.
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.