Saudi Arabia unsure of reaching OPEC deal on oil cuts

Saudi Arabia said Thursday it is unsure if a deal will be reached with fellow OPEC members on oil output cuts.

After the conclusion of the 175th meeting of the OPEC Conference in Vienna, Saudi Energy Minister Khalid al-Falih told reporters that the kingdom is “not confident” an agreement on oil output cuts can be reached.

An OPEC press official told reporters negotiations will continue Friday between the 15-member organization and non-OPEC oil producing allies, which include Russia and nine countries, to discuss how much they can contribute to supply cuts.

The participation of Russia, the world’s second largest crude producer, in the deal remains a question as Moscow is reluctant to lower its output.

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Russian Energy Minister Aleksandr Novak was in Vienna earlier Thursday but had to leave early in order to participate in the Eurasian Economic Union meeting in St. Petersburg, Russia.

Novak is expected to return to Vienna on Friday to join the talks.

Two difficult decisions for the cartel and its allies, known as OPEC+, are the quantity supply cut and how members of the group will divide the amount of oil cuts among themselves.

A higher cut in the output means lower revenues from oil exports for producing countries whose economies are highly dependent on sales.

Libya and Nigeria were exempt from earlier cuts, while Iran asks not to participate in any deal that would reduce its oil output.

Iranian Minister of Petroleum Bijan Zangeneh said earlier Thursday his country should be excluded from any decision that involves curbing crude production as Tehran faces a major decline in crude exports due to sanctions of Washington.

Al-Falih said before the start of the conference that a 1 million barrels per day (mbpd) oil cut would be sufficient for OPEC+.

The kingdom is also under pressure by the US President Donald Trump who does not want OPEC to cut production and prefers low oil prices for American consumers.

Trump wrote Wednesday on social media.

Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!

Although Trump has been critical of OPEC for years whenever oil prices were high, he recently affirmed his support of Saudi Arabia despite the kingdom’s admission it murdered journalist Jamal Khashoggi. 

With pressure from Trump, Riyadh could propose OPEC+ lower production by 1 mbpd not to aggravate the US president. But that could force it to lose credibility within the cartel, its allies and global oil market, according to experts.

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OPEC+ lowering output by 1 mbpd would be less than market expectations, which estimates a cut of 1.2 mbpd to 1.4 mbpd in order to boost prices.

The group agreed in November 2016 to cut oil production by 1.8 mbpd to rid oversupply in the market and raise oil prices, and extended that until the end of 2018.

As oversupply rises with the US, however, Russia and Saudi Arabia pumping oil at record levels, crude prices slumped more than 30 per cent in the last two months.

On the demand side, the trade dispute between US and China threatens global economic growth and could lead to lower demand in 2019.

Trump, Netanyahu and Bin Salman ‘symbols of violence’ – Cartoon [Sabaaneh/MiddleEastMonitor]