Oil prices plummeted by nearly 5% on Thursday after Saudi Arabia said OPEC and its allies were working towards reduced cuts, causing concerns that the bloc is struggling to deal with the recent supply glut ahead of its meeting.
Saudi energy minister Khalid al-Falih said OPEC and allies, including Russia, were still working on a deal to reverse the 30% slide in oil prices, witnessed since October.
However, he said the preference for the bloc’s leader was a “sufficient cut but not overly large” cut, which comes as Saudi Arabia come under increasing pressure from the Trump administration to maintain low prices.
Falih suggested a 1 million barrel per day reduction “would be adequate”, while analysts say a reduction of at least 1.3-1.5 million bpd would be needed to balance the market.
“With the market looking for a big production cut number, there’s a little disappointment,” said Giovanni Serio, global head of research at Vitol, the world’s largest independent oil trader.
Although Saudi Arabia has called for a deal that is “fair and equal” across all member states, there is uncertainty over how committed Russia is to promises it has previously made regarding cuts.
Russian energy minister Alexander Novak said extreme winter weather conditions hindered the country’s ability to cut supplies until later in 2019, stating: “For us it is much more difficult to cut”.
During the last OPEC meeting in June, energy ministers said it would relax cuts that had been in place since January 2017 in preparation for reduced exports from Iran following US sanctions imposed.