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OPEC works on deal to cut output, still needs Russia on board

Reuters  |  VIENNA 

By El Gamal and Ahmad Ghaddar

(Reuters) - OPEC and its allies are working towards a deal this week to reduce output by at least 1.3 million barrels per day, four sources said, adding that Russia's resistance to a major cut was so far the main stumbling block.

OPEC meets on Thursday in Vienna, followed by talks with allies such as on Friday, amid a drop in crude prices caused by global economic weakness and fears of an glut due largely to a rise in U.S. production.

The group's de facto leader, Saudi Arabia, has indicated a need for steep reductions in output from January but has come under pressure from U.S. to help support the world economy with lower prices.

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

The sources, three from the Organization of the Petroleum Exporting Countries and one from a non-OPEC producer, said the meetings were taking place in a difficult environment and that Russia's position would be key in reaching a deal.

"is playing tough," one of the OPEC sources said.

Another OPEC source said: "The Saudis are working hard on the cut. But if says no cut, then we (OPEC) won't cut."

The Saudi and energy ministers, and Suhail bin Mohammed al-Mazroui, said on Tuesday that an adjustment in global was required but all producers must be on board.

"The next road to cross is whether all countries are willing to come on board and contribute to that cut," Falih told television.

Russian sources have indicated could contribute some 140,000 bpd to a reduction, but Middle East-dominated OPEC insists Russia cut by 250,000-300,000 bpd.

Two sources said talks were focusing on a pro-rata cut of 3.0-3.5 percent from October output levels, with no exemptions for any member.

Sources also said OPEC could delay a decision to cut if the main criteria such as Russia's involvement were not met, even though doing so would mean a further fall in prices.

"OPEC can always meet again in February, for example, and decide on a cut then. Those who were not able or willing to cooperate will be wanting to cut then," one source said.

previously insisted on a need to reduce production.

It was unclear whether the apparent shift in position was caused by OPEC using negotiation tactics to bring Russia on board or by pressure from Trump to refrain from cutting output.

DAMAGE AVOIDANCE

Iraq's said OPEC must come up with a medium- to long-term strategy to achieve crude price stability and minimise damage to caused by geopolitics.

said would work to help balance markets and bolster prices. is OPEC's second-biggest after

In October 2018, OPEC pumped 32.916 million bpd, while its non-OPEC allies pumped 18.252 million bpd, according to the group's internal data.

The non-OPEC source said a deal could still be done this week, though details remained unclear: "The Saudis and Russians have an agreement to cut. They are just working on the final details on the volumes and mechanisms."

Brent rose more than 2 percent on Tuesday, boosted by expectations OPEC would reduce output [O/R].

(Additional reporting by and in and Ahmed Rasheed in Baghdad; Writing and editing by and Dale Hudson; Graphics by Amanda Cooper)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, December 04 2018. 18:58 IST
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