Negotiations among major oil producers over price-boosting supply cuts continued into a second day, as regional rivals Saudi Arabia and Iran remained deadlocked over the terms of a deal.
OPEC is holding talks with allied oil-producing nations including Russia at its headquarters in Vienna, Austria on Friday. It comes after deep divisions in the energy alliance were laid bare at a closely-watched meeting on Thursday, with the group unable to agree on the terms of crude output cuts.
The talks made progress on a critical front on Friday, with Russia agreeing to cut output by 200,000 barrels per day, news agencies reported. The 15-member OPEC group had delayed a decision on how many barrels it would take off the market until Moscow committed to a specific reduction.
However, the talks hit an impasse because Saudi Arabia refuses to agree to an exemption for Iran, OPEC sources told Reuters.
U.S. sanctions against Iran, OPEC’s third-largest producer, have already significantly reduced its exports. Iranian Energy Minister Bijan Zangeneh says his country should not be forced to cut production in light of the sanctions, which are backed by the Saudis.
The meeting between OPEC and non-OPEC members comes at a time when the oil market is near the bottom of its worst price plunge since the 2008 financial crisis.
Brent was trading at $60.85 a barrel, up 1.3 percent, at around 7:34 a.m. ET (1234 GMT), while West Texas Intermediate (WTI) stood at $51.78, around half a percent higher.
“OPEC is of course very strong when you think about their cooperation with Russia — that’s tremendously successful. But, you know, don’t expect miracles,” Johannes Benigni, chairman of JBC Energy Group, told CNBC’s Hadley Gamble on Friday.
When asked whether negotiations could continue into the weekend, Benigni said: “There will be a deal (today), I’m pretty convinced about that.”
The Saudis have been leading calls for the group to trim output, amid surging supply and fears that an economic slowdown will erode fuel demand. The oil-rich kingdom has previously indicated it wants the group to curb output by at least 1.3 million barrels per day (bpd).
However, Saudi Arabia’s Energy Minister Khalid al-Falih told reporters Thursday morning that an output cut of 1 million bpd would be sufficient for OPEC and its allied producers. That is in part because Alberta, Canada announced this week it would require producers to cut output by about 325,000 bpd to drain the province’s brimming crude stockpiles.
OPEC delegates previously told Reuters the cartel could cut 1 million bpd if Russia reduces its output by 150,000 bpd. If Moscow chips in a 250,000 bpd reduction, that may tee up a 1.3 million bpd cut from OPEC.
Energy Aspects says communicating a deal properly is imperative because the market is fragile right now. The energy research firm warns that a “jumbled statement referring to some broad intention to prevent the market from being oversupplied will undoubtedly trigger a further sell-off in prices.”
Oil prices have crashed around 30 percent over the last two months, ratcheting up the pressure on budgets in oil-exporting countries.
Ahead of the meeting, the likely outcome was OPEC and non-OPEC members would agree to a supply cut of around 1 million to 1.4 million bpd. As always though, the hard part for the energy alliance is not figuring out a number, but rather how the group divvies up the cuts.
OPEC began capping supply in partnership with Russia and several other nations in January 2017 in order to end a punishing downturn in oil prices.
The alliance reversed course and agreed to hike output in June after it removed more barrels from the market than it intended, largely due to the ongoing freefall in Venezuelan output and supply disruptions in Libya.
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