OPEC and its allies are expected to agree on the terms of price-boosting output cuts on Thursday, despite pressure from President Donald Trump to reduce the cost of crude.
The influential oil cartel meets at its headquarters in Vienna, Austria, with the aim of reaching an accord over production levels for the next six months. The 15-member organization will then hold talks with allied non-OPEC partners on Friday, with markets widely-expecting the energy alliance to announce steep output reductions from January.
The much-anticipated meeting comes at a time when the oil market is near the bottom of its worst price plunge since the 2008 financial crisis. Oil prices have crashed around 30 percent over the last two months, ratcheting up the pressure on budgets in oil-exporting countries.
International benchmark Brent crude was trading at $61.08 a barrel at around 7:10 a.m. London time, down around 0.8 percent, while West Texas Intermediate stood at $52.36, more than 1 percent lower.
OPEC kingpin, Saudi Arabia has been aggressively pushing the need for production cuts to stabilise prices. Though the nation would not want to irk the US who has bailed the Saudis out on the Jamal Khashoggi affair.
The oil-rich kingdom has indicated it wants the group to curb output by at least 1.3 million barrels per day.
But, Russia has appeared reluctant to sign off on a reversal in production strategy. The non-OPEC heavyweight has warned the energy alliance must tread carefully this week to ensure it does not change course by 180 degrees whenever it meets.
The likely outcome is OPEC and non-OPEC members agree to a supply cut of around 1.2 million to 1.4 million barrels per day. Though, the hard part for the energy alliance is not figuring out a number, but rather how the group divvies up the cuts.
OPEC began managing crude supply in partnership with Russia and several other nations last year in order to end a punishing downturn in oil prices.
The Middle East-dominated group produces around 40 percent of the world’s oil and has a long history of adjusting production to guide the energy market.
The energy alliance’s policy of capping output has drawn particular ire from Trump.
“Hopefully OPEC will be keeping oil flows as is, not restricted. The world does not want to see, or need, higher oil prices!” Trump said in a tweet on Wednesday.
The U.S. president is publicly in favour of low fuel prices and has urged Saudi Arabia to drive crude futures even lower at OPEC’s final meeting of the calendar year.
OPEC’s de facto leader Saudi Arabia comes into the meeting badly bruised by revelations that agents of the kingdom murdered Washington Post columnist and U.S. resident Jamal Khashoggi in October.
Trump is standing by his allies in Riyadh, but he’s made it clear he wants the Saudis to keep a lid on oil prices.
Also in a surprise announcement earlier this week, Qatar has disclosed its intentions to leave OPEC, citing limited benefits it enjoys from the cartel and minimal returns on investments it makes in the group.