Could Saudi Arabia Walk Away From Oil Talks?
It might seem disingenuous to pose such a question: Could Saudi Arabia, OPEC’s de facto leader, undo much of its public relations and media spinning work over the past year trying to convince global oil markets that indeed a much needed oil production cut is on the horizon and walk away from upcoming oil production talks?
Admittedly, the kingdom has become a master at market moving headlines and just a glimmer of hope that OPEC will cut or even cap production can send prices upward, even if it’s short lived.
The best example of this came in September on the sidelines of an energy forum in Algiers when the Saudis announced that a 1% production cut would be discussed in November.
Sure, a 1% production cut is marginal, while it was only an agreement to agree to talk in the future. No matter. Markets jumped. A week after the announcement, oil prices breached the $50/barrel price point for the first time since July. As usual, however, the upward tick in prices eventually stalled, with markets waiting breathlessly for either more market moving news from Saudi Arabia or OPEC, but longing for a real and substantial oil production cut.
Since then, more statements have been made followed by a corresponding reaction by markets. But its starting to look like OPEC might finally make a production cut, the first since 2008. Iran and Iraq, potential holdouts, might be coming around, while Nigeria and Libya will likely get a pass on having to cut production this time amid their own spiraling domestic problems that has impacted their ability to pump oil and pay the bills.
However, there does seem to be a limit on just how much OPEC can move markets at times without out actually doing something. On Wednesday, oil prices slid downward, despite Iraq, the cartel’s number two producer, announcing that it was on-board for a production cut.
Iraqi Prime Minister Haidar al-Abadi said Baghdad will “shoulder responsibility” for some of the production cuts planned by OPEC, the AP reported.
Saudis seek more
Now, it seems that Saudi Arabia is now seeking more than a just 1% cut, the number proposed in September. The kingdom is backing an effort to make the steepest oil-production cuts possible at OPEC’s meeting next week and to convince producers outside the cartel to help remove almost 2% of the world’s oil supply, The Wall Street Journal reported on Thanksgiving Day, citing people familiar with the matter.
Moreover, it could be more than just rhetoric. In late October, the Saudis were reportedly talking up an oil production cut as high as 4%.
Source: Forbes
