Saudis to Press OPEC for a Million-Barrel Cut in Oil Production

VIENNA — Saudi Arabia is poised to advocate that OPEC cut oil production by about a million barrels a day — roughly 1 percent of the global oil supply — as the group begins discussions on Thursday on ways to keep supply and demand in balance.

Khalid al-Falih, the Saudi energy minister, said Thursday morning that “all options” are on the table but that a reduction of one million barrels was “adequate” to balance the markets. He added that he had heard a range of numbers discussed, from 500,000 to 1.5 million barrels a day.

Mr. Falih, whose country represents 12 percent of global oil output, said that he had met with the American special envoy Brian Hook on Wednesday. He noted that Mr. Hook had “refrained” from asking the Saudis not to cut production, but quickly added, “I don’t need permission to cut.”

The two men discussed several issues, including Washington’s plans to carry out sanctions on Iran.

With OPEC expected to meet through the afternoon, oil prices dropped sharply Thursday morning. Brent crude, the international benchmark, dropped about 3 percent to $59.72 a barrel, and WTI was down a 3.2 percent to $51.26 a barrel.

“Markets are greedy,” said Roger Diwan, a vice president for oil market strategy at the research firm IHS Markit. “They want certainty that you have a large enough cut to change the direction of prices. They haven’t heard that yet.”

OPEC has been whipsawed by competing pressures lately. On one hand, the world is widely viewed as having an oil glut substantial enough to justify a cut in production. Such a move would prop up prices, which have tumbled since reaching about $76 a barrel for West Texas intermediate crude, the American benchmark, in early October.

On the other hand, President Trump is pressing OPEC, and Saudi Arabia in particular, to maintain production levels to keep prices low for American consumers. Mr. Trump turned to Twitter on Wednesday to show that he was paying attention to the talks.

“Hopefully OPEC will be keeping oil flows as is” he wrote in one post. “The World does not want to see, or need, higher oil prices!”

Mr. Trump’s attempts to intervene in OPEC deliberations create a quandary for the Saudis, whose role in setting production levels and influencing the markets makes them key decision makers at OPEC.

A refinery in Saudi Arabia. President Trump is pressing OPEC, and Saudi Arabia in particular, to maintain production levels to keep prices low for American consumers.CreditAhmed Jadallah/Reuters

“The Saudis have many constituencies to please, some of them contradictory,” Mr. Diwan said. “The tweeting takes away their ability communicate effectively.”

In normal times, analysts said, there would be little hesitation to cut supplies. But these are not normal times.

“This is one of the strangest OPEC meetings I can remember,” Jim Krane, an energy fellow at the Baker Institute at Rice University said on Wednesday. “Balancing the oil market is taking a back seat to political intrigues involving Saudi Arabia and Donald Trump.”

“It’s like there’s a Trump-caricature Thanksgiving parade balloon hanging outside OPEC headquarters,” he added.

Tensions are also emerging within OPEC. Qatar, which has long been part of a bloc of Gulf Arab states supporting the Saudis, said on Monday that it would leave the oil cartel next year to focus on developing natural gas. It hinted that the decision was motivated partly by frustration over the Saudis dominance of oil policy.

Iran, Saudi Arabia’s longstanding rival in OPEC, is a complicating factor. The Iranians reacted angrily to news reports of Mr. Hook’s presence in Vienna. The diplomat has been traveling the world to build support for America’s latest sanctions against Iran.

The Iranian oil minister, Bijan Zanganeh, criticized Mr. Hook’s discussions as “unprofessional” and “interfering,” according to the Iranian news agency IRNA, and said that OPEC was an independent body that did not take orders from the United States, which is not a member.

Mr. Zanganeh also told reporters before the beginning of the meeting on Thursday that Iran would not accept a cut beyond what was already being reduced by sanctions.

Saudi Arabia, the world’s largest exporter, and Russia, which also produces about 12 percent of the world output, increasingly see their interests aligned. Production cuts in late 2016 lifted prices to the point that Saudi Arabia and Russia were persuaded in June to open up the taps. The move was partly a response to Mr. Trump’s complaints at the time about rising prices.

The oil market’s focus, though, quickly shifted from possible supply shortages to worries about a potential glut caused, among other things, by unexpectedly robust output from the United States and a slowing world economy.

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