Such a cut would be conditional on the participation of non-OPEC producers including Russia, Mexico and Kazakhstan and wouldn’t be agreed on Friday, according to the report. “It’s unlikely to happen, especially with Iran at odds with Saudi Arabia. Not only that they [the other producers] agree to do it but also that they stick by the agreement”, said Ric Spooner, chief analyst at CMC Markets in Sydney.
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The overnight price decline is “a signal that market-watchers are increasingly expecting the cartel to at least stay its hand at a production quota of 30 million barrels a day”, OCBC said in a note.
Iran’s comeback is tied to the looming end of sanctions imposed over its nuclear program.
“China’s implied oil demand growth… grew at 3.8 percent year-on-year in October (407,000 barrels per day), an improvement relative to the 226,000 barrels per day growth in September”, Barclays said.
“While oil advanced for the second day ahead of the OPEC meeting, there is really nothing much to cheer about”, said Bernard Aw, market strategist at IG Markets in Singapore. Iran won’t accept any limit on its production below pre-sanctions levels, Oil Minister Bijan Namdar Zanganeh said.
In spite of the oil price bumping around its lowest in almost seven years and the finances of OPEC members creaking under the strain, Saudi Arabia has shown no signs of backing down without support from other producers, and analysts said the new details did not suggest any weakening in its resolve.
Some of those extra barrels will likely come from Iraq. Industry publication Energy Intelligence reported on Thursday that Saudi Arabia, the largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), might propose that members cut oil output by 1 million barrels per day next year if non-OPEC countries joined in and if OPEC member Iraq froze its output and Iran also contributed to cuts.
These trends mean that the pressure is on Saudi Arabia, which accounts for about a third of OPEC’s output, to cut back. That strategy clearly hasn’t worked, with benchmark US crude’s value falling by more than 40 percent over the past year and now hovering around the $40 mark per barrel.
“The Saudis can weather this, but even for them it’s been incredibly costly”, he says. Prices have decreased 24 percent this year. “This has its effect on our economy”.
But the Saudis appear willing to endure the pain rather than make a move that would help rivals like Iran and Russian Federation.
“I trust Saudi Arabia will act responsibly in line with its reputation”, Birol, who worked for OPEC before joining the IEA 20 years ago, told Reuters on the sidelines of a the global climate change summit in Paris.
“They worry about a potential realignment of power in the Middle East if Iran were to emerge from the shadows of sanctions and reassert themselves”, he said.
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The low prices hurt all oil producers, even mighty Saudi Arabia.
