IE 11 is not supported. For an optimal experience visit our site on another browser.

Oil drops 4 percent amid OPEC battle with Russia

"If everybody is not willing to join and contribute equally, we will wait until they are," said the Saudi oil minister.
Image: OPEC
Journalists attend the 175th OPEC Conference of Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria on Dec. 6, 2018.Joe Klamar / AFP - Getty Images

OPEC and its allies are working towards cutting oil output by up to 1.5 million barrels per day but could fail to reach a deal if no compromise is found with non-OPEC Russia, the Saudi energy minister said on Thursday.

The Organization of the Petroleum Exporting Countries is meeting Thursday but is also waiting for news from Russian Energy Minister Alexander Novak, who flew back from Vienna earlier for possible talks with President Vladimir Putin.

Novak returns to Vienna on Friday for talks between Saudi-led OPEC and its allies.

OPEC hopes to prop up the price of crude, which has fallen by almost a third since October, but President Donald Trump has demanded it make oil cheaper by refraining from output cuts.

"We hope to conclude something by the end of the day tomorrow ... We have to get the non-OPEC countries on board," the Saudi minister, Khalid al-Falih, told reporters.

"If everybody is not willing to join and contribute equally, we will wait until they are."

Asked whether OPEC could fail to reach a deal, he said all options were on the table. Possible output cuts by OPEC and its allies ranged from 0.5-1.5 million bpd, and 1 million bpd was acceptable, he said.

Brent oil futures fell 3 percent to below $60 per barrel on fears that there could be no deal and as traders and OPEC watchers said a cut of 1 million bpd was below expectations.

Image: OPEC
Khalid Al-Falih Minister of Energy, Industry and Mineral Resources of Saudi Arabia speaks prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria on Dec. 6, 2018.Ronald Zak / AP

"We think OPEC will spend some time to choose the words being used. Being too cautious on the words, to please President Trump, runs however the risk of diluting the message," said Olivier Jakob from Petromatrix consultancy.

OPEC delegates have said OPEC and its allies could cut output by 1 million barrels per day if Russia contributed 150,000 bpd of that reduction. If Russia contributed around 250,000 bpd, the overall cut could exceed 1.3 million bpd.

Novak said on Thursday that Russia would find it harder to cut oil output in winter than other producers because of the cold weather.

Oil prices have crashed as Saudi Arabia, Russia and the UAE have raised output since June after Trump called for higher production to compensate for lower exports from Iran, OPEC's third-largest producer.

Russia, Saudi Arabia and the United States have been vying for the position of top crude producer in recent years. The United States is not part of any output-limiting initiative due to its anti-trust legislation and fragmented oil industry.

Iranian exports have plummeted after the United States imposed fresh sanctions on Tehran in November. But Washington gave sanctions waivers to some buyers of Iranian crude, further raising fears of an oil glut next year.

"Hopefully OPEC will be keeping oil flows as is, not restricted. The world does not want to see, or need, higher oil prices!" Trump wrote in a tweet on Wednesday.

Iranian Oil Minister Bijan Zanganeh said on Thursday he would support a cut as long as Iran didn't need to reduce its own output. Iraqi Oil Minister Thamer Ghadhban said Iraq, as OPEC's second-largest producer, would support and join a cut.