Oil prices fell sharply Friday after Saudi Arabia pulled out of a scheduled meeting with Russia and other oil producers outside the Organization of Petroleum Exporting Countries. OPEC and non-OPEC members were scheduled to meet Monday to discuss production cuts ahead of the 14-nation oil cartel’s Nov. 30 meeting.
At 2:55 a.m. EST Saturday, Brent crude oil, the global benchmark, was trading at $47.12 a barrel, lower by almost 4 percent, but dipped below the $47 mark several times in the preceding hour. WTI Crude, the U.S. benchmark, was trading at a loss of over 4 percent at $45.96 a barrel.
In the meeting between OPEC and non-OPEC producers, Russia, which along with Saudi Arabia is one of the world’s two largest producers, was expected to offer to freeze production at current levels instead of reducing it. Saudi Arabia pulled out of the talks due to disagreements over sharing supply cuts, and the Monday talks collapsed before they even started.
An OPEC official said Friday that Saudi Arabia wanted the cartel members to clear up their own differences before they sat down at the table with non-OPEC members, the Wall Street Journal reported.
Crude oil prices had recovered during the past week after Iran, an OPEC member reluctant to agree to production cuts, signaled its willingness to fall in line with the cartel’s plans.
“It is highly probable that oil and energy ministers of the member countries of Organization of Petroleum Exporting Countries will reach an agreement in the Nov. 30 meeting,” Iranian Oil Minister Bijan Zangeneh said Nov. 19 after meeting with OPEC’s secretary general in Tehran.
Iran and Iraq had disagreed with production cuts at OPEC’s previous meeting in Vienna a month ago, sending crude prices tumbling. The change of stance by Iran, which has been ramping up its production since the lifting of international sanctions earlier this year, was expected to boost the chances of a production cut being agreed to during the upcoming meeting Wednesday.
“The charade is coming to an end. They had to cancel the Monday meeting to avoid the embarrassment of it ending in failure. The market richly rewarded OPEC for rhetoric and now is poised to punish it harshly if they fail to come to an agreement,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, told Bloomberg.