The day before OPEC reached a deal on reducing oil output, Saudi Arabia had tried to gauge the market reaction to a possible no-deal with some of the biggest global oil traders, in a sign that they were not confident a deal would be had.
On Tuesday last week, Saudi Arabia held private talks with Mark Couling, head of crude oil at the world’s largest independent oil trader Vitol, Pierre Andurand at Andurand Capital, and a trader from Lukoil’s trading company Litasco, the Financial Times reported on Sunday, quoting people familiar with the talks.
The talks were held in Vienna before Saudi Arabia’s oil minister Khalid al-Falih arrived in the Austrian capital for the OPEC ministerial meeting scheduled for the next day.
The Saudis warned oil traders in that meeting that it was not certain that the cartel would reach an agreement to cut supply in its attempt to boost oil prices, the FT quoted sources familiar with the talks as saying. Previous indications from other Gulf nations’ representatives had also pointed to uncertainties over a deal due to the continuing disagreements between Saudi Arabia, Iraq and Iran.
But on Wednesday last week, OPEC, against most odds, reached a deal to cut oil supply by 1.2 million bpd to 32.5 million bpd, effective in January. Prices soared by 8 percent on November 30 alone, and jumped a total 14 percent between Wednesday and Friday. Related: Canada Fires Up Drilling Rigs On News Of OPEC Deal
Saudi Arabia speaks regularly with energy analysts, although it is rarer to see the Saudis discuss oil matters with trading companies.
The fact that they held talks with major oil traders prior to the OPEC meeting may signal that Saudi Arabia wanted to know just how far they had to bend over backwards to get last week’s OPEC meeting done. They likely wanted to know how much ground they would need to give up to Iran and Iraq—the holdouts—if they continued to hold out.
One Saudi delegate told the FT:
“These discussions are a part of ongoing consultations we have with analysts, producer companies and traders particularly around OPEC meetings and throughout the year.”
By Tsvetana Paraskova for Oilprice.com
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