Global oil markets plunged Thursday after Saudi Arabia's powerful energy minister dampened hopes for steep production cuts at today's OPEC meeting in Vienna amid speculation that non-member allies such as Russia many not follow the cartel's lead despite a glut in global crude that has prices more than 30% lower over the past two months.
Khalid Al-Falih told reports in Vienna that no agreement had been reached on output cuts, and that members did not want to "shock the market" with significant changes in the cartel's current baseline, and suggested that trimming output by around 1 million barrels would be sufficient. He also said that non-member allies, such as Russia, are not willing to make similar decisions, "we will wait until they are".
"We hope to conclude something by the end of the day tomorrow. We have to get the non-OPEC countries on board," Al-Falih said. "If everybody is not willing to join and contribute equally, we will wait until they are."
Brent crude contracts for February delivery, the global benchmark, fell 3.64% to $59.32 a barrel, while West Texas Intermediate crude contracts for January delivery, which are more tightly linked to U.S. gas prices, were down 3.54% to $51.02.
Al-Falih also referenced pressure from President Donald Trump, who Tweet yesterday that he hoped OPEC would make no changes to it current output schedule, conceding that it was "a healthy thing" to be reminded about the needs of the American consumer.
The 15-member group, which collectively produces around a third of global crude output, is expected to be pushed by Saudi Arabia to agree production cuts of around 1 million barrels per day in order to address what it considers an imbalance in global supply linked to record production in the United States, softer demand from China and the issuing of waivers by the U.S. State Department to key customers buying Iranian crude that would normally be subject to sanctions.
However, the Vienna meeting remains shrouded in political uncertainty following the murder of dissident Saudi journalist Jamal Khashoggi in late September, which has raised speculation that Riyadh will keep oil prices low in order to assuage pressure from Washington and elsewhere
"The Joint Ministerial Monitoring Committee yesterday recommended that OPEC cuts output over 2019, however it is still unclear what the size of the cut may be," said ING's commodities strategist Warren Patterson, who expects a headline reduction of around 1.2 million barrels per day. "Today's meeting may not offer full clarity as the OPEC+ meeting is scheduled for tomorrow, so this is when we will likely find out how much Russia is willing to cut."
Russia's energy minister, Alexander Novak, also reportedly told the country's Interfax news agency that it was "much harder" for it to cut production over the winter months, compared to OPEC nations based in warmer climates, but nonetheless insisted any decision would be taken based on "real market conditions, not Trump Tweets".
Cracks in the OPEC facade have been appear for much of the past few weeks, adding to doubts that a collective agreement on cuts will be reached either today or when ministers meet with non-member allies tomorrow in the Austrian capital.
Earlier this week, Qatar, a relatively small OPEC member that produces about 600,000 barrels of crude per day, will leave the cartel on January 1 in order to focus its energies on natural gas production.
That news came just hours before Iraqi oil minister Jabar al-Luaibi told reporters that OPEC should look at solutions to lower oil prices that don't always involve production cuts, adding that any agreement the cartel reaches must avoid damage to its members.
U.S. crude stocks, as well, have added downward pressure to global prices as American drillers pump a record 11.7 million barrels per day, taking domestic supplies to around 450 million barrels, according to recent data from the American Petroleum Institute.
The U.S. Energy Information Administration will publish official stock data later today that is expected to show an 11th consecutive week of increases, the longest streak of gains in nearly four years.