The OPEC oil-producing countries, the organization that produces about a third of the world's oil, met Thursday in Vienna to discuss a reduction in production that will stimulate oil prices in the face of the sales of recent weeks. Since October, crude has become cheaper by more than 30%.
The organization has decided to postpone its decision on the cut of oil pumping pending the decision of Russia, which is reluctant to reduce production now so that prices do not impact on the population at the gates of the Siberian winter.
The members of this organization, led by Saudi Arabia, would have agreed to a slight reduction in production but doubts about the size of the cut have shaken the markets. The final decision of Russia remains, which will be announced this Friday during the third day of the OPEC meeting. In fact, the OPEC + committee, in which Russia also participates, recommended to its members a cut in production but without specifying the figures in a formal agreement.
But things are not really clear. Saudi Arabia's oil minister, Khalid Al-Falih, acknowledged to the press that he did not trust OPEC and the other oil producers (for Russia) to reach an agreement. "The uncertainty remains regarding the final decision of the OPEC, "said Brian Kessens, an analyst, according to Bloomberg." Right now, it's a market that is assuming the worst. "Massive oil sales also skyrocketed as equity markets sank. of reference in Europe, came to be left 5%, the largest drop in two weeks.
The decision puts Saudi Arabia on the ropes, who walks over the precipice. Since the Saudi kingdom needs to increase prices to balance its accounts while its main historical partner has warned that it does not want price increases. Donald Trump warned on Wednesday the Saudis that "no one wants, no one needs more expensive oil." Through his Twitter account, the Republican said "hopefully OPEC will keep the flow of oil as it is, without restrictions."
Washington "is not in a position to tell us what we should do," the Saudi minister said. "I do not need anyone's permission to decrease" the production, he added. Arabai Saudi had proposed at the start of the meeting in Vienna a reduction in pumping of between 900,000 barrels per day and one million barrels per day. "We are looking for a sufficient reduction to balance the market," said Saudi Energy Minister Jaled al Faleh, a heavyweight of the organization, before the start of this important meeting, according to Reuters.
Al Faleh defended a production reduction of "one million barrels per day" on Thursday. But this level, lower than the expectations of the markets, caused a new fall in prices. The barrel of Brent, a reference in Europe, lived a day of high volatility and came to fall more than 5% falling below $ 59.
"Saudi Arabia suggested a lower production reduction than the consensus estimated," explained David Madden, analyst for CMC Markets.
The real scope of the reduction in production is the main mystery of the meeting, as well as what could be agreed on Friday at a meeting between OPEC and its partners, with Russia in the lead. These two groups, which represent more than half of the world's supply, go hand in hand since the end of 2016 with a production limitation agreement.
Russian Energy Minister Alexander Novak, who is due to attend Friday's meeting in Vienna, said Thursday from St. Petersburg that his country was "following the real situation and the real market assessment." But he recalled that in the middle of winter, the Russian "weather conditions" made "much more difficult to reduce (production) than for other countries," implying that a possible Moscow effort would be made later. For Commerzbank analysts, "Russia will have a key role in this context."
On Wednesday, the London-based brokerage firm PVM estimated that an absence of a reduction in production would trigger "a sales frenzy of biblical proportions and guarantee a return to a global overabundance of oil."
OPEC's room for maneuver is limited, with Saudi Arabia unlikely to openly challenge the US president after the international outrage that sparked the murder of journalist critical of the kingdom's power Jamal Khashoggi at his country's consulate in Istanbul . The Saudi Crown Prince, Mohamed bin Salman, needs both the protection of his ally in the White House and a barrel of oil more expensive to carry out its economic reforms.