From the lingering backlash over the killing of journalist Jamal Khashoggi to the collapsing oil price, this week’s meeting in Austria of OPEC and other top oil producing nations is shaping up to be the most important, and most unusual, in years. There are many story lines. Here are the 5 to watch most closely.
A Cut Is Coming, But How Much?
What a difference a few months make. The June meeting was all about raising output to counter rising prices and the oncoming threat of Iran sanctions. Mission accomplished, and then some.
A bad combination of underestimating how much oil Iran would still be able to sell, along with continued record output from the U.S., sent prices tumbling.
November posted the biggest monthly drop in a decade. Now the Organization of the Petroleum Exporting Countries has to change its tune and ask for cuts, which won’t be easy as some members want – or need – to keep output up.
The likely outcome is OPEC agreeing to a production cut of around 1.2 million to 1.4 million barrels per day. As always though, the hard part for the cartel is not figuring out a number, but rather how the group divvies up the cuts.
The Real OPEC?
Not only is Saudi Arabia dealing with the Khashoggi backlash, it’s also facing increasing grumbling from other OPEC members that it may be getting a little too cozy with non-OPEC member Russia.
As Russia’s oil production has grown over the years, it has sidled up to Saudi Arabia to coordinate output. The two countries discussed this at last weekend’s G-20 summit meeting and will again try to formalize this side-deal on Friday after OPEC meets.
With production around 11 million barrels a day, Russia can alter OPEC’s calculus. It simply needs to make sure its growing relationship with Saudi Arabia outside of the organization doesn’t splinter the group.
