30 November 016, Lagos – After falling to as low as $46.32 on Tuesday, global oil benchmark, Brent, jumped to $49.66 per barrel on Wednesday on growing optimism that the Organisation of Petroleum Exporting Countries would agree on a production-cut deal later in the day.
The 14-member oil cartel is in a meeting at its headquarters in Vienna to discuss terms of a potential deal to cut production in an effort to prop up prices that have fallen by more than half since 2014 due to oversupply.
Saudi Arabia’s Energy Minister, Khalid al-Falih, said he believed the market’s fundamentals were moving in the right direction, but he believed the group was “getting close to a deal”.
“The communication this morning is extremely positive from Iran,” said Bjarne Schieldrop, a commodities analyst from Sweden’s SEB bank, adding that the market was volatile ahead of the meeting’s outcome, according to the Wall Street Journal.
OPEC experts ended their meeting on Monday without agreeing on concrete details of the planned reduction in oil output by individual countries that will be presented to an OPEC ministerial gathering today, an OPEC source told Reuters.
The group had in September said it would reduce production to 32.5 million barrels per day from current production of 33.24 million bpd.
But Iranian oil minister had told reporters in Vienna his nation won’t reduce production, according to Bloomberg.
A 10-hour technical meeting focusing on how to share the burden of cuts was said to have failed to resolve differences, with Iran still aiming to pump roughly seven per cent more than a level proposed by Saudi Arabia.
The Saudis are ready to reject a deal unless all OPEC members, excluding Libya and Nigeria, participate, Bloomberg quoted people familiar with the kingdom’s current position at the talks.
Goldman Sachs Group Inc has said the market was pricing in a 30 per cent chance of a deal.
While an accord could push prices up about $5 a barrel, according to Morgan Stanley, a failure could drive it down into the $20s, said Amrita Sen, chief oil analyst at Energy Aspects Ltd.
Saudi Arabia’s Energy Minister, Khalid Al-Falih, who has led the push for OPEC to cut production for the first time in eight years, changed his tone on Sunday, saying a deal might not be needed.
Similarly, Russia dimmed the prospects for a broader deal to revive prices by saying it’s not planning to attend crucial talks on Wednesday.