OPEC+ Recommends Oil Cuts, But No Deal Yet on Size of Curbs

Galtero Lara
Diciembre 6, 2018

Most producers made clear they agree on the need for a cut in oil production.

The deal is monitored by the Joint OPEC/Non-OPEC Ministerial Monitoring Committee (JMMC), which is dominated by Saudi Arabia and Russian Federation.

US special representative for Iran, Brian Hook, met with Saudi Energy Minister Khalid Al-Falih in Vienna on Wednesday, according to a person familiar with the matter.

Iranian oil minister has lashed out at USA special representative for Iran Brian Hook over his "meddlesome" meetings with members of the Organization of Petroleum Exporting Countries in Vienna, asserting that OPEC is an independent body that does not take orders from the US.

When President Trump announced his decision to pull the US out of the Iran Nuclear Deal and reimpose sanctions on the Islamic Republic, many oil producers ramped-up production over fears of the effects the sanctions would have on trading. A source close to the Russian Energy Ministry said, "No one is eager to cut unless there is an emergency".

Oil prices have fallen by nearly a third since October to around $62 per barrel after Saudi Arabia raised production to make up for the drop in Iranian exports.

In a tweet on Wednesday, the president warned OPEC against restricting oil flows and said the world does not want to see higher oil prices.

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The production surge took place in the run-up to Trump's pledge to sanction Iran's oil sector on November 4 and later decide to give waivers to some customers. Falling demand has also been an issue and with global growth forecasts recently downgraded, the price of oil has been plummeting to the bottom of the barrel.

Possibly complicating any OPEC decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October. "They'd like to see lower gasoline prices at the pumps, because that's important for votes in the United States." .

The cartel's de facto leader, Saudi Arabia, has been calling for steep cuts in output from January.

"I think the likelihood is that they will cut crude production rate, maybe not as dramatically as some people would like, to try and meet a balance between what the USA would like and their own personal interests".

Bob McNally, president of US -based Rapidan Energy Group, said OPEC was stuck between a rock and a hard place given pressure from Trump on one hand and the need for higher revenues on the other.

"Nobody wants to mention a number, because it means you're committing yourself to how much you're going to cut", said Al Rumhy.

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