Saudi Arabia: OPEC seeking 'sufficient cut' to balance oil market

Jermaine Castillo
December 7, 2018

"We have to get the non-OPEC countries on board", Saudi Energy Minister Khalid al-Falih told reporters before the OPEC meeting started.

Before the six hours of discussions in the Austrian capital on Thursday, Al-Falih had said that "if everybody is not willing to join and contribute equally, we will wait until they are".

He added that OPEC and other producers have not reached an agreement regarding oil production cuts, adding that he hopes to reach something by the end of tomorrow, Friday.

Brent oil futures fell as much as 5 percent to below $59 per barrel on fears that there could be no deal but later recovered somewhat, trading down 2 percent by 1325 GMT.

The Saudi Arabian endorsement of moderate curbs comes amid reluctance of main ally Russian Federation to make substantial cuts, and pressure from the US President Donald Trump to push prices lower. "We just have to see how it will be distributed", another delegate said.

However, analysts at ING told AFP news agency that the USA administration could possibly use the murder of journalist Jamal Khashoggi as leverage.

Oil ministers from 20 or so countries are in Vienna for two days of meetings - first, the 15 members of OPEC, then a wider group including countries outside the cartel.

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- Cuts on the cards?

"A million b [arrels cut] would be ideal", said Falih. "I think that's the fair and equitable solution", he said.

US President Donald Trump has repeatedly pushed Saudi Arabia and OPEC to boost oil production in order to drive down crude prices. It is the United States where we are seeing the bulk of the increase in oil output.

Zangeneh said the estimated surplus now on the market amounted to 1.3-2.4 million barrels per day.

Ideally, "the price would be better to stand at $60-70".

Opec, the Organization of the Petroleum Exporting Countries, has certainly had its share of criticism over many years.

Trump has continued to support the kingdom despite worldwide outrage over the murder but he is at the same time keeping up the pressure for lower prices. Saudi Arabia, the largest producer in the cartel, is seeking to walk a fine line between preventing a surplus and appeasing President Donald Trump.

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"However, depending on the financial markets, the recovery will likely be measured initially and more closely aligned with cash flow, with the activity surge we experienced in the first half of 2018 unlikely to repeat", Schlumberger Executive Vice President, Wells, Patrick Schorn said at an energy conference in NY on Wednesday.

"They should know that OPEC is not part of their Secretary of Energy".

Novak, speaking from Saint Petersburg on Thursday, said that his country was watching closely how the situation was developing.

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 US sanctions.

Saudi Arabia, OPEC's de facto leader, has made clear that it won't shoulder the burden of trimming production alone.

Qatar minister Saad Sherida Al-Kaabi said he had met a number of other OPEC ministers, but not his Saudi Arabian colleague.

The main tool it has is to manage its own production levels - either by cutting if it wants prices to rise or increasing supplies if it wants them to fall, at least to a point that would not cause prices to collapse.

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