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The oil markets exhaled early on Thursday morning as two OPEC sources announced that the oil cartel had tentatively agreed to a production cut of non-specific volumes.
The announcement as to exactly how much OPEC is agreeing to cut and which of its members will be tasked with doing so will come later, according to the sources, as they are waiting on Russia, without which the cuts could be toothless.
Russia’s energy minister, Alexander Novak, was in Vienna earlier, and now must touch base with President Vladimir Putin before committing to anything. Novak is expected back in Vienna, answer in hand, on Friday.
Two of OPEC’s members, Libya and Nigeria, have asked to be exempt from the cuts like they were for the last round of cuts, although OPEC delegates yesterday were trying to persuade both countries to cooperate this time around. Iran, under the weight of US sanctions against it, has refused to curb production, saying that as long as it remains under sanctions it will not restrict output.
While the exact figures that the cartel and OPEC, and the rest of the non-OPEC allies will cut has not yet been announced, news that they have agreed to cut at all should lift prices that sunk earlier in the day.
At 9:04am EST, the WTI benchmark had slid a massive 3.40% (-$1.80) to $51.09 per barrel. The international Brent benchmark had fallen 2.81% (-$1.73) to $59.83—below the $60 psychological threshold that in the past has caused trading panic.
The news of OPEC’s tentative agreement will be met with disappointment from President Donald Trump, who yesterday called on the cartel to keep oil flows as they were, and “not restricted”.
The Joint Ministerial Committee of OPEC announced earlier today that it had officially recommended a production cut to the cartel and its non-OPEC allies of an unspecific volume.
An official OPEC statement is expected later today, although specific figures may not be released until tomorrow when Russia returns to the negotiating table.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.