It’s only an advisory group with no decision-making power, but the recommendation from the Organization of Petroleum Exporting Countries Economic Commission Board is the first step in changing production policy at OPEC & Friends. Today the group told OPEC oil ministers, who will make the actual decision on December 6, that the oil market is oversupplied and that OPEC needs to reduce production from October levels by 1.36 million barrels a day.
OPEC pumped 32.9 million barrels a day in October as Saudi Arabia increased production. In January OPEC had produced 32.3 million barrels a day.
The key to any official decision to cut production is the relationship between Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin. Russia has, so far, seemed reluctant to reduce production. But it’s quite possible that the Russian president, seeking to sow as much dissension as possible between Saudi Arabia and its U.S. ally, will agree to a production cut favored by the Saudis. The Russian President and the Saudi Crown Prince are scheduled to meet at the G20 meeting the started today in Buenos Aires. U.S. President Donald Trump has publicly lobbied Saudi Arabia to keep pumping so that oil prices go even lower than their current level.
That may be a difficult position for the Saudis to support given that the international Brent crude benchmark is looking at a 22% loss in November. That would be the biggest drop since the global financial crisis in 2008.
From the advisory group the recommendation goes to the Joint Ministerial Monitoring Committee, a small group of six nations that overseas the 2016 agreement on increasing production. That committee meets in Vienna on December 5. The next day the recommendation goes to the full meeting of OPEC ministers and then to a gathering of OPEC and non-OPEC ministers.
Oil prices continued to fall in the current bear market for the commodity. U.S. benchmark West Texas Intermediate was off 0.52% to $51.18 a barrel at 2 p.m. New York time today. International benchmark Brent crude fell 1.28% to $58.75 a barrel.