The Organisation of Petroleum Exporting Countries (OPEC) has ended talks in Vienna without a deal on oil production cuts.
The size of Russia’s contribution remained a sticking point before further talks today.
Saudi Arabia’s Energy Minister Khalid Al-Falih said he was not confident of an agreement, after discussions of a combined one million barrel-a-day output reduction concluded without a consensus.
That left the oil market dangling in uncertainty before non-OPEC allies joined a second day of talks yesterday.
“Not everybody is ready to cut equally,” Al-Falih told reporters in Vienna. “Russia is not ready for a substantial cut,” he said.
Oil in London tumbled as much as 5.2 per cent to $58.36 a barrel, before paring losses to $59.34.
Minister of State, Petroleum Resources Ibe Kachikwu, said the country cannot exceed 800,000 barrels per day or at most one million barrels per day, in view of the current state of the global oil industry.
He said global oil industry is currently challenged as prices went down as low $65 per barrel at the market.
Dr. Kachikwu said: “I do not see Nigeria exceeding 800,000 barrels or one million barrels per day, as the industry is industry is challenged today by factors that are beyond immediate solution. Prices have gone down to $61 per barrel, far from what it used to be in recent times.”
The minister said prices of oil should be around $65 per barrel or $67, urging everybody to contribute their quota to the growth of the market.
Kachikwu said: “Everybody should see his or her self-contributing to the industry positively. The bigger the size of the industry, the more difficult it is to contribute to and also the smaller the size of the sector is, the easier it is to contribute to its development.”
OPEC conference President Suhail Mohamed Al Mazrouei, has acknowledged the receipt of Qatar’s notice to withdraw from the membership of the organisation from January 1.
Al Mazrouei, who is also the UEA, Minister of Energy and Industry, made this known in his opening address at the 175th meeting of the OPEC conference in Vienna, Austria.
A statement by the group reads: “It should also be noted that the Organisation has received a letter from the state of Qatar giving notice of its intention to withdraw from its membership of OPEC, pursuant to Article 8 of the OPEC Statute, with effect from 1 January 2019.”
The Kingdom’s dependence on Russia shows how much OPEC has changed since 2016, when the two countries ended their historic animosity and started to manage the market together.
“The alliance has transformed OPEC into a duopoly in which Russia, which isn’t a formal member of the cartel but part of the production-cuts alliance, is asserting its power.
“The impression that the group can’t really come to a decision without first checking with Moscow is going to be difficult for some members to swallow,” said Derek Brower, a director at consultant RS Energy Group.
“The market won’t care if tomorrow they manage a sizable cut with proper metrics, but that’s still a big if,” he said.
Earlier yesterday, ministers were discussing a proposal to curb combined OPEC and non-OPEC output by about 1 million barrels a day, said a delegate. That was in line with Saudi Arabia’s preference for a moderate reduction that wouldn’t “shock the market.”
The group is under pressure after a collapse in oil prices last month. Saudi Arabia, the largest producer in the cartel, is seeking to walk a fine line between preventing a surplus next year and appeasing President Donald Trump. Striking that balance got even trickier as the United States (U.S.) government data showed the shale boom turned the country into a net oil exporter last week for the first time in 75 years.
The summit in Vienna was not the only story yesterday, as ministers sat down at the headquarters of the OPEC, Russian Energy Minister Alexander Novak flew to St. Petersburg to meet President Vladimir Putin to decide on their country’s contribution. If the group’s most important ally in the OPEC+ alliance decides to make a sizable cut, the cartel would follow up.
Before the meeting, Al-Falih had said that “if everybody is not willing to join and contribute equally, we will wait until they are” and he was prepared for the consequences of failing to get a deal.
Another sticking point in the talks was Iran’s contribution, said a delegate. Iran is currently subject to U.S. sanctions and as such won’t participate in any curbs, the country’s Oil Minister Bijan Zanganeh said. Other members said it should participate, said a delegate.
OPEC ministers are also discussing whether to exempt Libya and Venezuela from making production cuts, another delegate said. Those countries, along with Nigeria, were opposed to cutting their own production, the delegate said.
“Some countries will struggle because their economies are very constrained” and Nigeria itself could only manage a small cut, Nigeria’s oil minister, Emmanuel Kachikwu, said in a Bloomberg television interview before the meeting.
OPEC is also contending with vociferous opposition from the U.S. president, who’s taken to using his Twitter account to berate the group’s policies and sees low oil prices as key to sustaining America’s economic growth.