A big week for oil and other markets – if this week’s crucial production OPEC meeting can strike a deal to cut output. And the Saudi’s have managed to cast some late doubt on any deal.
On the New York Mercantile Exchange, West Texas Intermediate crude futures fell 4% to end at $US46.06 a barrel on Friday, while in London Brent crude futures fell 86 cents, or 1.7%, to $US47.24 a barrel to be also down around 4% for the day.
US West Texas crude futures ended the week up just 13 cents a barrel, after trading in the range of $US45.77 and $US49.20 a barrel. Brent crude rose 20 cents during the week and swung between $US46.85 and $US49.96 a barrel, according to Reuters figures.
On Friday night it became known that Saudi Arabia had pulled out of planned talks with non-OPEC nations (including Russia) before Wednesday’s formal OPEC meeting as disagreements about how to share any supply cuts.
OPEC officials were scheduled to meet with non-members including Russia tonight, our time before the end of year ministerial meeting in Vienna on Wednesday night, our time.
As a result of the withdrawal, the meeting was later cancelled.
Instead, OPEC has called another meeting to try to try and resolve its own differences, particularly the question of whether Iran and Iraq are willing to cut production.
Saudi Arabia wants an OPEC deal in place before conversations with other producers such as Russia, according to media reports.
The Saudi’s sat is pointless to attend when the 14 oil cartel members have not yet reached a deal among themselves. Iran – which is recovering after years under Western sanctions – still believes it should be treated as a special case without any output restraints, similar to deals for Libya and Nigeria.
Delegates had been expecting Iran to freeze at pre-sanctions reduction levels, around 4 million barrels a day.
And Iraq, which is fighting an expensive war against Islamic State, is reluctant to play a part in any output cut and it is feared it will honour it in the breach by maintaining production.
Tonight’s meeting with non-OPEC countries such as Russia and Kazakhstan was designed to bring countries outside the cartel on board. Russia, after months of talking cuts, now says OPEC must reach a consensus before involving non-member producers in any talks.
That’s an impasse and no matter what is announced on Wednesday night, no one will believe it until there are actual and sustained production cuts.
