Oil Prices Climb As OPEC+ Reportedly Nearing Production-Cut Agreement

Oil traders pushed crude prices 5% lower on Thursday after OPEC+ members failed to reach an agreement on production cuts - and outcome that helped stoke rumors that Russia and Saudi Arabia, the bloc's two most influential members, had struck an agreement to keep production elevated to placate President Trump. But given the intensifying political pressure that threatens to fracture the decades old cartel, leaked reports from Friday's meeting suggest that Russia and Saudi may have accepted that cuts are necessary -  though doubts remain about whether the 1 million b/d figure that has been bandied about would have any enduring impact on prices amid fears that global markets would remain hopelessly oversupplied.

The dominant rumor following Friday morning's meeting suggested that OPEC was leaning toward total cuts of 1 million b/d (or more) with members contributing 650k and non-OPEC members (mostly Russia) contributing 350k. Iran, Venezuela and Libya each demanded an exemption from the cuts, citing economic hardship (yet Saudi Arabia has resisted calls for it to shoulder the bulk of the cuts, and insisted instead that they be evenly spread throughout the bloc, and reports later Friday said OPEC and Russia would seek a "symbolic" commitment to cuts from Iran).

Still, in one sign that the bloc's two most dominant members might not be willing to cooperate, Russia and Saudi Arabia have refused to jawbone the market lower: Russian Energy Minister Alexander Novak said that while Russia would consider cuts of 100k-150k b/d, this deceleration would need to be short-lived, with production possibly ramping back up after three months because "market conditions may change."

And even if they do relent, analysts have expressed doubts about whether 1 million b/d in cuts would remove enough supply from the market. One analyst with Commerzbank said oil would "likely fall further" if OPEC+ only cut production by 1 million b/d because "this will not be sufficient to rebalance the market." An analyst at Jeffires agreed, saying cuts of 1m b/d oil could lead to a sell-the-news reaction in the short term, particularly if details are "sketchy."

OPEC

According to the Financial Times, influential Saudi energy minister Khalid Al Falih said he was "not confident" of an agreement. Others have said they still believe an agreement for a 1 million b/d cut could still be reached.


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