The long-awaited oil production cut formal meeting has now started as the world’s leading countries in oil production gathered in Vienna for the state of the potential price production freeze. The meeting aims to decrease production by around 1.2 million barrels per day in order to stabilize oil prices and the market as a whole itself.
Prior to the day of the meeting, oil prices have tumbled up and down on growing uncertainties before the meeting that an oil production cut agreement would not be met. This was caused by a number of OPEC countries announcing their intention to be exempted from a possible cut although countries such as Russia who is not under the organization have shown its support for placing a cap on oil production. Even Russian President Vladimir Putin stated that he believes a deal could be met by the end of the formal meeting in Vienna.
Despite the positive statements from Russia, the country did not send a representative during the day of the formal meeting announcing that their presence would not be necessary according to Russia’s Energy Minister
The concern was then overlooked after Iran’s oil minister stated that he believes in a deal or an agreement being met at the end of the meeting. It can be remembered that Iran along with Iraq have announced that they intend to increase production. Bijan Zanganeh, oil minister for Iran said that he have “good expectations for a meeting”. OPEC has earlier negotiated with Iraq to cut production in their efforts to bring back the oil prices to more stable levels.
Iran also stated that they are willing to curb their production as early as next year after its ripping back the market share it lost due to Western sanction years. Saudi Arabia has yet to comment although they have pressed on earlier that they would agree to an overall production cut or it wouldn’t agree at all.
Oil Price Movement
The positive comments led the price of crude oil to jump by more than 5% as of UTC 10:40 with the Brent crude rising to 3.7% at $49.11 per barrel in early morning trading posting gains of more than 5%. Oil have recently dropped before by as much as 4% a recent couple of trading sessions as Saudi Arabia, Iraq and Iran have stated specific demands to a potential agreement.
An agreement to curb oil prices would drive back the price of oil to as high as $60, therefore, stabilizing the oil price and market. At the moment, the crude oil price is trading at around the $47 or $48 level from a recent decline to as low as $43. Failure of the meeting would result in the prices plummeting to as much as $35 even to as low as $25 according to a number of analysts.
By Wednesday, the International Brent crude was trading up by 80 cents around $47.18 per barrel while the U.S. West Texas Intermediate(WTI) crude was trading up at 1.57% or 71 cents to $45.94 per barrel.