Saudi Arabian oil officials won’t attend a meeting Monday with their Russian counterparts and others, OPEC officials said, disrupting plans between the world’s two largest petroleum producers to coordinate output cuts meant to elevate slumping crude prices.
The move puts renewed focus on the Organization of the Petroleum Exporting Countries to break through an impasse at the 14-nation cartel’s next meeting on Wednesday in Vienna. The group controls a third of world oil production and pledged in September to cut production to help draw down a global oversupply that has sunk prices to levels that have harmed economies dependent on petroleum revenue across the world.
OPEC left the details of its cut undecided until Wednesday’s meeting, and the negotiations leading up to the gathering have been difficult. Iraq and Iran, OPEC’s second- and third-largest producers, have yet to agree on a detailed plan to reduce output discussed by the cartel.
Some OPEC members have looked to Russia, which isn’t a member of the cartel, to join in trimming its output. A plan being discussed for the past week involves OPEC, Russia and other non-OPEC producers slashing almost 2% of global output over the next six months.
But OPEC officials said it has become clear the group couldn’t seek help from Russia and producers outside the cartel until OPEC itself commits to specific action. Russian energy officials have said they would hold output steady, or freeze, if OPEC took action.
Saudi Arabia wants a “clear decision within OPEC” before asking Russia and others to join, an OPEC official said Friday.
Some OPEC members still plan to meet with Russia and other producers outside the cartel, despite the Saudi pullout. Any gathering would be unlikely to produce a credible agreement without Saudi Arabia, OPEC’s most influential member. Azerbaijan, Mexico and Kazakhstan are also expected to attend.
Oil prices fell on Friday on news of Saudi Arabia’s move. U.S. and international benchmark prices declined by about 4%, with U.S. prices falling to $46.06. It was the biggest percentage loss in two months.
The disagreement underscored the intricate geopolitics and economic self interest at play among several countries trying to strike an agreement.
One OPEC official raised the idea that any deal reached by the cartel on Wednesday would need non-OPEC assistance to be successful. Even with a deal, the official said, Saudi Arabia would “definitely” expect an output reduction from non-OPEC producers.
Saudi Arabian officials have said they won’t bear the brunt of production cuts alone, as they did in the 1980s, when a similar oversupply shook the oil market. Then, the Saudis cut millions of barrels from their daily production, losing customers across the world and doing very little to raise prices in the end.
In 2014, when oil prices began their descent, Saudi Arabia decided it wouldn’t go it alone again and would fight to keep market share instead. But prices stayed lower for longer than it and many market observers thought, and the kingdom has reversed course, seeing the need for an output cut to bring stability back to prices.
Iraq and Iran have complicated the situation.
Iran—Saudi Arabia’s geopolitical rival—wants to increase production, not cut, to regain market share it enjoyed before U.S. and European sanctions on its nuclear program crippled its energy industry.
Iraq has raised production to record levels this year and says it needs oil revenue to fight a war against Islamic State.
The two countries are squabbling with OPEC members over the numbers to be used as a baseline for production cuts.
An OPEC official said Iraq wanted to use its own production estimate of 4.8 million barrels a day as a baseline for the cut, rather than independent data used by OPEC that shows Iraq’s production at 200,000 barrels a day less.
Write to Benoit Faucon at [email protected]