Oil Prices Fall As OPEC Failed To Stop Excess Production

Opec officials failed to bridge their differences on an agreement to cut production and revive oil prices, while Russian Federation said it’s not planning to attend crucial talks on Wednesday.

OPEC members are still having disagreements about an oil production cut deal less than 24 hours away from their official meeting in Vienna, Austria on Wednesday.

OPEC’s 14 members are scheduled to meet in Vienna on November 30 to decide whether to reduce their oil output, which hit a new record of 33.6 billion barrels per day in October. “OPEC and non-OPEC countries must take action”, del Pino was quoted by local news agency APS as saying.

Consider that OPEC’s September framework called for a cut of 200,000 to 700,000 barrels a day based on production levels at that time, far below OPEC’s last cut of 4.2 million barrels a day in 2008.

Iraq and Iran are two of the top three oil producers in OPEC (behind Saudi Arabia), and they are also geopolitical rivals. As a presidential candidate Trump threatened to rip up the nuclear deal reached between Iran and the USA and Western powers. Iran first requested an exemption from a production cut because it was in its first year of production after worldwide sanctions against it were lifted.

OPEC sources told Reuters that Saudi Arabia has offered to lower its output by 500,000 bpd and said it would like Iran to hold production under 4 million bpd. Iran and Iraq together produce over 8 million bpd, only slightly behind long-time leader Saudi with 10.5 million bpd. With that amount of production, OPEC can drastically affect oil prices. “Volatility is set to be high in the oil market in the days ahead”, analysts at Barclays said.

OPEC kingpin Saudi Arabia added to the pessimism about prospects for a deal on Sunday by appearing to say it could live without an agreement.

Perhaps with that in mind, Khalid Al-Falih, the Saudi oil minister, tried over the weekend to change the OPEC narrative. In October, Iran produced 3.92 million bpd, just 80,000 shy of its pre-sanctions goal.

The stakes are high for OPEC Wednesday to show it still has the ability to act decisively.

As Bloomberg highlights, Russia’s absence from discussions in Vienna is creating complications for OPEC members that insist on participation of non-members in supply cutbacks with one day to go before OPEC ministers meet to decide policy.

Brent crude futures were trading at $47.80 per barrel at 0546 GMT, down 44 cents, or 0.9 per cent, from their last close.

The EIA (U.S. Energy Information Administration) estimates that United States and Brent crude oil prices will average $50 per barrel and $51 per barrel, respectively, in 2017.

Like a year ago, crude oil futures are tumbling again Tuesday as hopes for a cut in output from the Organization of Petroleum Exporting Countries (OPEC) fade due to entrenched differences between its most important members.

US stocks swung between slight advances and declines Tuesday as a fall in oil prices limited gains. It also refocuses the spotlight on the battle for influence between the Saudis and Iran.

And even if there is agreement to cut output, there is no guarantee individual members will honor commitments. They haven’t made the truly hard decisions of precisely who will cut, when the cuts will go into effect, how long the cuts will last, or how compliance will be enforced.

In energy, oil prices fell sharply after it seemed like a deal to reduce oil production among OPEC nations was starting to fall apart ahead of their meeting Wednesday in Vienna.