Worried about the oil slump, OPEC and its partners discuss the reduction of supply: sources

DUBAI / LONDON (Reuters) – OPEC and partners are discussing a proposal to cut oil production by 1.4 million barrels a day, according to three sources close to the subject, although Russia may not have achieved such a significant reduction.

Worried about the drop in oil prices attributable to the slowdown in demand and the record supply of Saudi Arabia, the United States and Russia, the Organization of Petroleum Exporting Countries ( UEO) speaks of a turnaround just a few months after an increase in production.

Such a change could provoke the anger of US President Donald Trump, who on Monday urged OPEC not to reduce its stocks. It would also risk giving up market share in the United States, while sources have indicated that Russia may not be ready to support such an initiative.

A sharp drop in prices has surprised many players in the oil market. Brent rose from $ 86 a barrel in early October to its highest level in four years, to 66 dollars Wednesday. Just a few weeks ago, some of the trading companies were talking about $ 100 worth of oil.

The sources, who refused to name their name because the talks are confidential, said that a reduction of 1.4 million bpd – or 1.4% of global demand – was an option discussed by the ministers of state. the energy of Saudi Arabia, Russia's non-OPEC and other countries in Abu Dhabi on Sunday.

"I think a reduction of 1.4 million barrels a day is more reasonable than above or below," said one of the sources.

OPEC and a group of non-OPEC countries, led by Russia, have been cooperating to limit oil supplies since early 2017. They partially canceled their cuts in June after Trump's pressure to lower prices.

The OPEC-led agreement eliminated the overabundance accumulated in 2014 as supplies from the United States and other countries outside the group exploded. OPEC production also increased, after Saudi Oil Minister Ali al-Naimi blocked OPEC's supply restriction in order to maintain its market share.

This time, Saudi Energy Minister, Khalid al-Falih, has publicly spoken of the need to cut supplies of one million barrels a day, showing that price support stood out from the rest of the world. market. OPEC is meeting on December 6 to set the policy for 2019.

A new round of OPEC-led supply cuts in 2019 would further support US shale oil production, which could repeat the cycle that took place in 2014.

LCOc1 oil prices rose Wednesday after falling 6.6% on Tuesday, the biggest one-day loss since July.

GRAPHIC: Current gross OPEC + output compared to October 2016 – tmsnrt.rs/2QGxId6

FIGURE AGAIN TO AGREE

Three weeks before the December 6 meeting in Vienna, OPEC and its partners did not agree on a final figure for a further cut in supply, sources said.

One of the three sources stated that a minimum reduction of 1 million bpd was envisaged and that it could exceed 1.4 million bpd. Another source, a delegate from OPEC, agreed that a reduction of more than 1.4 million bpd was possible, depending on the market.

Nigeria and Libya, which are exempt from the current supply-limiting agreement, could be included in a new deal, two sources close to the case said.

"We are talking about a reduction on the part of everyone, including Nigeria and Libya, because their production has exceeded the ceiling of recent months," said a source.

While Nigerian and Libyan production has increased, Iran, another OPEC member, is facing a decline in exports due to US sanctions that began this month. Tehran may not be called upon to make a voluntary cut, said another of the three sources.

Iran, upset by the increase in Saudi and Russian production in response to Trump's pressure, will welcome cuts in supply to these producers.

OPEC officials were not sure that Russia is joining a new round of supply cuts. Russian Energy Minister Alexander Novak said on Wednesday that no urgent measures were required to stem the decline in prices.

"The market is pretty volatile today. We remember that the price of oil was rising sharply in the same way, now it is falling. We need to look at long-term development and determine how the price will be stabilized, "he said in Singapore.

But OPEC officials hope that Moscow will eventually find each other.

One of the three sources said that any reduction for Russia could be gradual, citing the example of the 2017 production cut agreement when Moscow made its share of cuts in stages.

"The proposal presents some challenges and Russia is part of it," said another source.