OPEC looking for ways to reduce production

OPEC oil producers will make Thursday a feverishly expected verdict on the level of declining output that they are ready to accept to stop the vertiginous fall in prices without causing the wrath of Washington linked to low prices.

The members of the organization, led by Saudi Arabia, meet on Thursday in Vienna at the headquarters of the organization, to try to find the magic formula that seduces a volatile market on which prices have fallen by 30% in two months.

On the eve of the meeting, US President Donald Trump, who has put pressure on OPEC for several months, urged the group not to increase the price of black gold, while wanting to continue to save US consumers

On Wednesday, behind-the-scenes negotiations began in the Austrian capital between the member-producing countries of OPEC and their partners, primarily Russia. These two groups of about twenty countries in total, representing more than half of the global offer, have been linked since the end of 2016 by a production limitation agreement.

Most analysts rely on the announcement of a reduction in production, the size of which remains the main unknown factor, with the goal of restoring the price of a barrel that now runs around 60 dollars for the barrel of Brent – the European reference.

– "We will have a drop" –

"Yes, we will have a fall," Minister of Oil of Oman Mohammed bin Hamad Al Rumhi said in Vienna. "We will have time to fix the details by tomorrow (Thursday)," he added.

For Stephen Brennock, an analyst with the London brokerage firm PVM, the agreement on further reductions is almost "preordained".

The opposite scenario would trigger "a frenzy of sales in biblical proportions and would guarantee a return to global oil overflowing." The only unknown at this stage is the volume of production cuts.

OPEC's room for maneuver is further reduced as it is difficult for the Saudis to afford to openly challenge the US president after international indignation at the murder of journalist Jamal Khashoggi at the Saudi consulate in Istanbul.

The Saudi hereditary prince Mohammed bin Salman (MBS) needs the protection of his ally in the White House … but also a more expensive barrel to implement his economic reforms.

"The key will be finding an agreement with Mr. Trump," according to Energy Aspects analysts.

"The great unknown factor is President Trump's reaction to any reduction in production," analysts said.

"Even if we think that President Trump will hesitate to aggravate the situation, the Saudis will carefully choose the formulation of each announcement of reduction of production", they add.

OPEC remains marked by the fall in prices following the decision to open the gates at the end of 2014, in order to regain market shares of the US shale roller. Prices plummeted to $ 45 a barrel in January 2015, weakening the petrodeminate economy.

This fiasco of OPEC has made the organization lose its credibility.

Since then, the alliance with other producers, including Russia, has allowed the group to contribute to the increase in crude oil prices until the beginning of October 2018.

Last June, the producers relaxed their discipline. The goal was to allow Russia and Saudi Arabia to extract more to offset the expected losses of Iranian barrels. The United States had in fact announced in November the reintegration of sanctions against Iranian oil imports, which was to reduce the global supply.

At the last moment, the United States granted exemptions to eight importing countries, at levels higher than those expected by the market.

This decision has brought down prices in the last two months, canceling the gains made in early 2017.

Possible sources of tension for Thursday's meeting, the Iranian Oil Minister, Bijan Namdar Zanganeh, asked Wednesday night for his country to be exempted from lowering production "until the United States unlawful sanctions they will not be revoked ".

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