Opec and its partners are discussing a proposal to cut oil output by 1.4 million barrels per day (mbpd), three sources familiar with the issue said, although Russia may not be on board for such a large reduction.
Worried by a drop in oil prices due to slowing demand and record supply from Saudi Arabia, Russia and the United States, the Organization of the Petroleum Exporting Countries is talking about a U-turn just months after increasing production.
Such a shift could anger US President Donald Trump, who urged Opec not to cut supply. It also risks handing market share to the United States, while the sources said Russia might not be willing to back such a move.
A steep slide in prices has surprised many oil market participants. Brent crude has fallen from a four-year high of $86 a barrel in early October to $66. Just weeks ago, some trading firms were talking of $100 oil.
The sources, who declined to be identified by name as the talks are confidential, said a cut of 1.4 mbpd – equal to 1.4 per cent of world demand – was one option discussed by energy ministers from Saudi Arabia, non-Opec Russia and other nations in Abu Dhabi.
"I believe a cut of 1.4 mbpd is more reasonable than above it or below it," one of the sources said.
Opec and a group of non-Opec nations, led by Russia, have been cooperating to limit oil supply since the start of 2017. They partially unwound their reduction in June after pressure from Trump to lower prices.
The Opec-led deal got rid of a glut that built up in 2014 as supply from the United States and other countries outside the group soared. Opec production rose too, after the then Saudi Oil Minister Ali Al Naimi blocked an Opec curb on supplies to preserve market share.
This time, Saudi Energy Minister Khalid Al Falih has publicly spoken of a need to lower supplies by 1 mbpd, showing price support is trumping market share. Opec meets on December 6 to set policy for 2019.
A new round of Opec-led supply cuts in 2019 would further support US shale oil production, potentially repeating the cycle that played out in 2014.
With three weeks to go until the December 6 meeting in Vienna, Opec and its partners have not settled on a final figure.
One of the three sources said a minimum cut of 1 mbpd was being considered and it could be larger than 1.4 mbpd. Another source, an Opec delegate, agreed that a larger cut than 1.4 mbpd was possible.
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