Oil prices plunge as Opec delays decision on cutting output
The Saudi energy minister has cast doubt on the prospect of Opec announcing a cut in output after admitting he was “not confident” a deal would be reached. At a crunch meeting in Vienna this week, the Opec cartel has tried to plot a course between protecting member countries’ revenues and not angering Donald Trump, who on Wednesday called for oil to keep flowing in order to hold down prices.Oil prices slipped 4% to below $60 (£47) on Thursday as Khalid al-Falih’s comments, reported by Bloomberg, placed question marks over a deal. Brent crude, the international benchmark, has plunged from $86 at the start of October to about $60 recently, over concerns at a glut in supply and faltering demand. Sources said the group had agreed on the need to curb production but had yet to reach an agreement on the exact figure.
Oil was down to $59.48 a barrel on Thursday, after a planned Opec press conference on the group’s deal failed to materialise. A briefing is now expected on Friday morning.
A reduction of between 0.5m barrels per day and 1.5mb/d is on the table, with experts saying around 1mb/d looked the most likely.
“To stabilise prices, 1mb/d would be enough,” said Ann-Louise Hittle of oil and gas analysts Wood Mackenzie, speaking from Vienna. “That’s a safe option in terms of not triggering some sort of reaction from Trump.”
Prices have fallen partly because the US issued waivers for sanctions imposed on Iran at the start of November. Another factor is surging US production, which has reached record highs of 11.5mb/d, or more than a 10th of global output, a figure that is expected to rise further in 2019.
A key question for Opec if it goes ahead with cuts is how they are divided between cartel members and its ally Russia, which is reluctant to make a big reduction. Most of the curbs would be expected to come from the group’s de facto leader Saudi Arabia, the UAE and Kuwait, and to take effect for six months from 1 January.
Opec’s meeting was overshadowed earlier in the week by Qatar, which has been hit by a Saudi-led boycott for the past 18 months, announcing it would quit the cartel to push its own gas-centric group.
According to delegates in Vienna, one subject that has “disappeared off the radar” is the prospect of Saudi Arabia’s $2tn (£1.6tn) flotation of part of its national oil company. The kingdom has denied reports the IPO of Saudi Aramco has been delayed indefinitely, though the country needs high oil prices to reach the valuation it wants.
Opec’s bid to stabilise prices by curbing production came as nearly 200 countries met a couple of hundred miles away at the UN climate change summit in Katowice, Poland, to discuss curbing fossil fuel production to tackle climate change.