Oil prices fell by nearly 4% overnight as the tooing and frooing within OPEC intensified to lockdown a deal to cut production to reduce global oversupply.
Our market seems to be a believer in a deal with the overnight ASX futures market showing a small gain ahead of trading starting at 10am.
Iran and Iraq exchanged offers, criticisms and gambits with Saudi Arabia to try and get some sort of deal early Thursday.
Russia has talked to Iran, and Iran has suggested that it will accept a freeze, if OPEC countries that have lifted production in the past year or so (eg, Saudi Arabia and Iraq) cut back to those previous levels.
Western analysts reckon a deal will happen tonight with an announcement early Thursday morning – even if it is an announcement that a deal has been done, with the details to follow.
But any deal will have to be more detailed than that because they s what has been in place since the ‘agreement’ to cut was reached in late September.
OPEC ministers start their talks (or are due to) at 10am Vienna time or 8pm Sydney time. It could be a long meeting, judging on the past two days of talks, rumour and proposals.
OPEC members last held a special meeting on September 28 on the sidelines of an energy conference in Algeria when it decided on a collective production target of 32.5 million and 33 million barrels a day, with the details to be worked out.
That has been going on for the past two months, to no avail and the talking and rumours have taken a toll on prices, especially overnight when they fell sharply, repeating the big fall of last Friday.
Brent futures in London fell $US1.86, or 3.9%, to settle at $US46.38 a barrel, while US West Texas Intermediate crude futures crude lost $US1.85, or 3.9%, to $US45.23. That was the biggest daily percentage decline for Brent since September.
Iran and Iraq, OPEC’s second-and third-largest producers, have resisted pressure from Saudi Arabia to cut or curb their oil output, making an agreement difficult.
“Iran and Iraq are refusing to cut…simply reaching the high end of the Algiers range will require greater cuts from other members, namely Saudi Arabia, which may be difficult politically,” analysts at Morgan Stanley said in a report, noting the bank was still biased towards OPEC reaching a deal, according to Reuters.
Documents prepared for the meeting propose OPEC production by 1.2 million barrels per day from October levels, an OPEC source familiar with the papers said, slightly more than the 1 million bpd the group discussed at a meeting in Algiers in September. OPEC produced around 33.82 million bpd in October.
Morgan Stanley said its base case was OPEC will announce a group quota for six months and ask non-OPEC countries like Russia to help. That could reduce OPEC production to about 33 million bpd and drive prices back into the $US50 a barrel range, the bank said, according to Reuters.
