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OPEC, Russia move closer to cutting oil output

Reuters  |  VIENNA 

By Astakhova and Nasralla

(Reuters) - OPEC and moved closer on Wednesday to agreeing cuts in production from next year despite pressure from U.S. to reduce the price of crude.

OPEC meets on Thursday in Vienna, followed by talks with allies such as on Friday. OPEC's de facto leader, Saudi Arabia, has indicated a need for steep output reductions from January, fearing a glut, but has resisted a large cut.

"All of us including Russia agreed there is a need for a reduction," Oman's told reporters after a ministerial committee that groups Saudi Arabia, Russia and several other producers met on Wednesday.

Exact volumes were still being discussed, he said. The cuts would take September or October 2018 as baseline figures and last from January to June.

Two OPEC delegates said Russian Energy was flying back to on Wednesday to get a final agreement from

has indicated it wants the Organization of the Petroleum Exporting Countries and its allies to curb output by at least 1.3 million barrels per day, or 1.3 percent of global production.

wants to contribute at least 250,000-300,000 bpd to the cut but Russia insists the amount should be only half of that, OPEC and non-OPEC sources said.

Russia's agency quoted an OPEC source as saying OPEC and its allies were discussing the idea of reducing output next year by reverting to production quotas agreed in 2016.

Such a move would mean cutting production by more than 1 million bpd. Saudi Arabia, Russia and the UAE have raised output since June after Trump called for higher production to compensate for lower Iranian exports due to new U.S. sanctions.

Russia, and the have been vying for the position of top in recent years. The is not part of any output-limiting initiative due to its anti-trust legislation and industry.

TRUMP RAISES PRESSURE

Oil prices have fallen by almost a third since October to around $62 per barrel after raised production to make up for the drop in Iranian exports.

also gave sanctions waivers to some buyers of Iranian crude, further raising fears of an

"Hopefully OPEC will be keeping oil flows as is, not restricted. The world does not want to see, or need, higher oil prices!" Trump wrote in a tweet on Wednesday.

Possibly complicating any OPEC decision is the crisis around the killing of at the in October. Trump has backed Saudi despite calls from many U.S. politicians to impose stiff sanctions on

"How can the Saudis cut substantially if Trump doesn't want a big cut?" said Gary Ross, of U.S.-based and a veteran OPEC watcher.

"Trump is worried about the Fed and inflation. So he wants low prices now. Also if Saudis are obnoxious with a deep output cut, it will spur the Democrats in to go more actively for the Nopec legislation and the withdrawal of U.S. support for the Saudi-backed forces in the war in Yemen," Ross said.

The Nopec legislation being discussed by U.S. lawmakers could make it possible to sue Saudi Arabia and other OPEC members for price fixing.

Bob McNally, of U.S.-based Rapidan Energy Group, said OPEC was stuck between a rock and a hard place given pressure from Trump on one hand and the need for higher revenues on the other.

"We think OPEC will try to come up with a fuzzy production cut ... It won't be called a cut but will effectively mean a cut, which will also be difficult to quantify," McNally said.

(Additional reporting by and Ahmad Ghaddar; Writing by Dmitry Zhdannikov; Editing by Dale Hudson; Graphics by Amanda Cooper)

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

First Published: Wed, December 05 2018. 22:21 IST
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