Six months ago, OPEC agreed to pump more oil to prevent prices spiking to $100 a barrel. Now the oil cartel is talking about cutting output to stop prices crashing below $50.
Members of the Organization of Petroleum Exporting Countries will meet in Vienna on Thursday. They’ll discuss how to stabilize the world market after US crude prices plunged 22% in November, marking the the worst month since the global financial crisis in October 2008.
US crude oil is now trading around $53 a barrel, down from a four-year high above $76 in early October. Brent crude has plunged to $62 from above $86.
Led by Saudi Arabia, OPEC will also seek Russian backing for supply restraint to put a floor underneath prices. The alliance between OPEC and the world’s second largest producer dates back to 2016, when they first agreed to cut production to halt a damaging collapse.
The International Energy Agency warned last month that supply is expected to exceed demand through 2019. In its November market report, OPEC said demand for its oil next year would be about 1.1 million barrels a day less than in 2018, and 1.4 million below current OPEC production.
But Saudi Arabia’s approach to this week’s meeting has been complicated by intense public pressure from President Donald Trump on the kingdom to allow prices to fall even further.
“Hopefully OPEC will be keeping oil flows as is, not restricted,” Trump tweeted on Wednesday. “The world does not want to see, or need, higher oil prices!”
Here are three possible outcomes from the Vienna meeting:
1. A big cut
Analysts say this is the most likely outcome, despite the pressure from President Trump.
Eurasia Group said in a report published last week that it expects an agreement by OPEC and Russia to cut a combined 1.5 million barrels a day from the market.
“While discussions will not be easy, Saudi Arabia will succeed in rallying the OPEC and non-OPEC group to decrease output,” it said.