OPEC na­tions de­lay oil out­put de­ci­sion

The Reporter (Lansdale, PA) - - BUSINESS - By Kiyoko Metzler and Carlo Piovano

VI­ENNA >> OPEC coun­tries hop­ing to sup­port the price of oil put off their de­ci­sion Thurs­day on how much to re­duce oil pro­duc­tion un­til they ne­go­ti­ate with ally Rus­sia on Fri­day on how much it will con­trib­ute to the cut.

Some saw it as a sign that the group of oil-pro­duc­ing na­tions may not have the po­lit­i­cal unity to rein in sup­ply and is suf­fer­ing un­der po­lit­i­cal pres­sure from U.S. Pres­i­dent Don­ald Trump to not push prices up again. Oth­ers in­ter­preted it as a tac­tic to get Rus­sia to agree to big cuts as well.

The price of oil has fallen about 25 per­cent be­cause ma­jor pro­duc­ers — in­clud­ing the U.S. — are pump­ing oil at high rates. It fell fur­ther on Thurs­day af­ter OPEC’s lack of ac­tion and amid broader con­cerns about global eco­nomic growth.

Saudi Ara­bia, the heavy­weight within OPEC, said Thurs­day it was in fa­vor of a cut of about a mil­lion bar­rels a day.

But upon leav­ing the meet­ing, Saudi oil min­is­ter Khalid Al-Falih said “we’re still de­lib­er­at­ing.” He said the OPEC coun­tries were still dis­cussing the dis­tri­bu­tion of the cuts be­tween them.

Iran, Saudi’s re­gional ri­val and fel­low OPEC mem­ber, has re­sisted any no­tion of cut­ting its out­put as its crude ex­ports are be­ing pinched al­ready by U.S. sanc­tions. It has wanted an ex­emp­tion.

The OPEC coun­tries will now dis­cuss the meet­ing with Rus­sia, which is not part of OPEC but has been co­or­di­nat­ing its out­put lev­els to sup­port the mar­ket.

Al-Falih said a de­ci­sion would take all day Fri­day. “I’m not con­fi­dent,” he added. Some ex­perts saw that as a tac­ti­cal move by OPEC coun­tries to not an­nounce a pro­duc­tion level as they pre­pare to ask Rus­sia and sev­eral other smaller non-OPEC coun­tries to also cut their out­put.

“If they would, then (Rus­sia and oth­ers) could ad­just their ne­go­ti­a­tion strat­egy,” said Jan Edel­mann, an­a­lyst at HSH Nord­bank.

What­ever the logic, the lack of clar­ity put an­other dent in the price of oil. The in­ter­na­tional bench­mark, Brent, was down

$2.20 at $59.36 a bar­rel on a day when stock mar­kets also fell sharply around the world.

The fall in the price of oil will be a help to many con­sumers as well as en­ergy-hun­gry busi­nesses, par­tic­u­larly at a time when global growth is slow­ing. And Trump has been put­ting pres­sure pub­licly on OPEC to not cut pro­duc­tion.

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

While Saudi Ara­bia has in­di­cated it is will­ing to cut pro­duc­tion, its de­ci­sion may be com­pli­cated by Trump’s de­ci­sion to not sanc­tion the coun­try over the killing of dis­si­dent jour­nal­ist Ja­mal Khashoggi. U.S. Sen­a­tors say, af­ter a brief­ing with in­tel­li­gence ser­vices, that they are con­vinced that Saudi’s de-facto ruler,

Crown Prince Mo­hammed bin Sal­man, was in­volved in Khashoggi’s death. Some ex­perts say that gives the U.S. some lever­age over the Saudis, though Al-Falih de­nied that on Thurs­day.

When asked if the Saudis had per­mis­sion from Trump to cut pro­duc­tion, Al-Falih replied: “I don’t need per­mis­sion from any for­eign gov­ern­ments.”

Ex­perts say this week’s meet­ings of the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries will in­flu­ence the price of oil over

the com­ing months. How strongly it does so could de­pend on Rus­sia’s con­tri­bu­tion.

An­a­lysts es­ti­mate that if Rus­sia is will­ing to step up its pro­duc­tion cuts, OPEC and non-OPEC coun­tries could trim pro­duc­tion by a com­bined 1.3-1.4 mil­lion bar­rels a day. A cut of 1 mil­lion bar­rels would be the min­i­mum to sup­port the mar­ket, and any­thing less could see the price of oil fall an­other $10 a bar­rel, ac­cord­ing to Neil Wil­son, chief mar­ket an­a­lyst at

Mar­kets.com.

“The car­tel has to go above and be­yond the 1 mil­lion bar­rels cut, to at least 1.4 mil­lion to re­ally steady the ship,” said Wil­son. “The stakes are high now for OPEC.”

OPEC’s re­liance on non­mem­bers like Rus­sia high­lights the car­tel’s wan­ing in­flu­ence in oil mar­kets, which it had dom­i­nated for decades. The OPECRus­sia al­liance was made nec­es­sary in 2016 to com­pete with the United States’ vastly in­creased pro­duc­tion

of oil in re­cent years. By some es­ti­mates, the U.S. this year be­came the world’s top crude pro­ducer.

OPEC is also riven by in­ter­nal con­flict, par­tic­u­larly the ri­valry be­tween Saudi Ara­bia and Iran. Mean­while, Qatar, a Saudi ri­val and Ira­nian ally, said this week it would leave OPEC in Jan­uary. While it said it was purely a prac­ti­cal de­ci­sion be­cause it mainly pro­duces nat­u­ral gas and lit­tle oil, the move was viewed as a sym­bolic snub to the Sau­didom­i­nated or­ga­ni­za­tion.

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