OPEC members and other oil-producing countries mulled cuts in output Thursday to prop up plunging prices, defying repeated calls by US President Donald Trump that they keep the taps open.
“We’re looking for a sufficient cut to balance the market, equally distributed between countries,” Saudi oil minister Khalid al-Falih told reporters ahead of an OPEC meeting in the Austrian capital.
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 — to discuss how to counter the tumble in prices over the past two months.
The price of a barrel of Brent, the European benchmark, fell four percent to below $60 Thursday, hit by the Saudi comments which were taken on the markets to be very cautious and concerns over an economic slowdown.
On Wednesday, Trump took to Twitter to urge producers to keep pumping.
“Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!” said Trump, who has repeatedly accused the cartel of keeping prices artificially high.
Saudi minister al-Kalih pointedly said Washington should back off.
“We don’t need permission from anyone to cut,” he said.
The US “is not in a position to tell us what to do,” he added.
At the end of 2016, OPEC’s regular members joined forces with other countries — most notably Russia — to scale back output in a bid to reduce a glut that was weighing on prices.
The coordinated move — which has since been extended — stimulated a long rally in oil prices right up until October 2018.
Over the past two months, however, prices have plunged again.
Cuts on the cards?
In order to try and counter this, the so-called OPEC+ — who together account for more than half of the world’s oil output — is discussing renewing the pact or perhaps cutting output still further.
All the signals are that more reductions in output are on the cards, despite the pressure from Trump, who argues that higher energy costs will choke off the economy.
“A million (barrels cut) would be ideal,” the Saudi minister said. “Ideally, everyone should join equally. I think that’s the fair and equitable solution.”
OPEC daily output stood at 32.99 million barrels in October, according to the International Energy Agency.
However, OPEC’s third-biggest producer Iran wants to be exempted from any such measures.
Given the economic sanctions being reimposed by the United States, the Islamic republic ” doesn’t join any agreement for cutting production because of the special situation Iran faces,” oil minister Bijan Namdar Zanganeh said.
Zangeneh said the estimated surplus currently on the market amounted to 1.3-2.4 million barrels per day.
Ideally, “the price would be better to stand at $60-70. That is acceptable for most OPEC countries.”
Trump’s intervention complicates matters.
OPEC kingpin Saudi Arabia, in particular, finds itself in an especially delicate position in the wake of the murder of opposition journalist Jamal Khashoggi.
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.
“The big unknown is how President Trump will react to any production cuts,” said analysts at ING.
Iran’s Zangeneh said it was the first time a US president was trying to tell OPEC what to do.
“They should know that OPEC is not part of their Secretary of Energy.”
Most OPEC members felt the same way, but “some members are going along with US policy,” he said.
Negotiations between OPEC members are fraught, however, as some feel that Saudi Arabia wields too much clout in setting policy.
Iran has accused Saudi Arabia of being in thrall to the US.
In a surprise move on Monday, Qatar — which has been an OPEC member since 1961 — said it would quit the cartel next month in order to focus on gas production.
Doha accounts for only around two percent of OPEC output but the move caught the headlines given the political overtones.
Qatar minister Saad Sherida Al-Kaabi said he had met a number of other OPEC ministers, but not his Saudi Arabian colleague.
“I don’t think they want to meet me. They are blockading our country,” he told journalists.
Qatar has been isolated by a group of countries led by Saudi Arabia since June 2017, in the worst political fallout between the energy-rich Gulf powers.