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OPEC looks to cut oil production to support falling price

AP  |  Vienna 

countries were gathered Thursday to find a way to support the falling price of oil, with analysts predicting the cartel and key ally would agree to cut production by at least 1 million barrels per day.

Crude prices have been falling since October because major producers including the US are pumping at high rates and due to fears that weaker economic growth could dampen demand. The fell 22 percent in November and was down again on Thursday amid speculation that OPEC's action might be too timid to support the market.

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

"I think a million (barrels a day) will be adequate personally," Saudi minister said upon arriving to the meeting in That, he said, would include production for both countries as well as non-countries, like Russia, which have in recent years been coordinating their production limits with the cartel.

That view was echoed by others, including the of and "I am optimistic that the agreement will stabilize the market, will stop the slide in the price (of oil)," said Iraq's

Investors did not seem convinced, however, and were pushing the down sharply again on Thursday, with some experts saying there is concern about the size of the cut.

The international benchmark for crude, Brent, was down $1.52 at $60.04 a barrel.

"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 Neil Wilson, at

The fall in the will be a help to many consumers as well as energy-hungry businesses, particularly at a time when global growth is slowing. And US 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 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

US Senators say, after a briefing with intelligence services, that they are convinced that Saudi's de-facto ruler, , 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 meeting of the will influence the price of oil over the coming months. How strongly it does so could depend on Russia's contribution, which will be determined in a meeting on Friday.

Analysts estimate that if 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 another $10 a barrel, according to Wilson.

"The stakes are high now for OPEC," he said.

OPEC's reliance on non-members like highlights the cartel's waning influence in oil markets, which it had dominated for decades. The OPEC-Russia 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

OPEC is also riven by internal conflict, especially between regional rivals and One of the key questions in Thursday's talks is whether to exempt from having to cut production, as its industry is already hobbled by U.S. sanctions on its crude exports.

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 and little oil, the move was viewed as a symbolic snub to the Saudi-dominated organization.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, December 06 2018. 20:10 IST
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