Oil prices slip 4% as OPEC’s major exporters struggle to agree on output cut deal
Oil prices slumped 4 percent on Tuesday as OPEC’s leading oil exporters struggled to agree on a deal to cut production to reduce global oversupply, with Iran and Iraq at loggerheads with Saudi Arabia a day ahead of meeting.
Brent futures LCOc1 were down $1.81, or 3.8 percent, at $46.43 a barrel by 12:55 p.m. EST. U.S. crude CLc1 fell $1.90, or 4 percent, to $45.18 per barrel. That was the biggest daily percentage decline for U.S. since July.
Most analysts believe the Organization of the Petroleum Exporting Countries will cobble together a deal to cut some production at its meeting on Wednesday in Vienna.
Iran and Iraq, OPEC’s second- and third-largest producers, have resisted pressure from the group’s de facto leader Saudi Arabia to curtail their oil output, making an agreement difficult.
“Iran and Iraq are refusing to cut…simply reaching the high end of the Algiers range will require greater cuts from other members, namely Saudi Arabia, which may be difficult politically,” analysts at Morgan Stanley said in a report, noting the bank was still biased towards OPEC reaching a deal.
Documents prepared for the meeting propose OPEC production by 1.2 million barrels per day from October levels, an OPEC source familiar with the papers said, slightly more than the 1 million bpd the group discussed at a meeting in Algiers in September. OPEC produced around 33.82 million bpd in October. [OPEC/O]
Morgan Stanley said its base case was OPEC will announce a group quota for six months and ask non-OPEC countries like Russia to help. That could reduce OPEC production to about 33 million bpd and drive prices back into the $50 a barrel range, the bank said.
Russia confirmed on Tuesday it would not attend the OPEC gathering, but said a later meeting was possible.
Analysts at Macquarie Capital said they believe OPEC will come to a “last minute” agreement but noted the remaining issues are still the original issues – which countries will cut and by how much.
