EMEA News
Oil Drops 4% as Saudis Abandon Non-OPEC Oil Meeting
More bad news for next week's meeting in Vienna to ratify the global oil output reduction deal has come from Saudi Arabia saying it had decided to pull out of pre-meeting talks with other nations – a disclosure that sent oil prices tumbling on Friday.
Futures fell 4.3 percent in New York, the biggest drop in over two months, as the Saudi pullout caused the entire meeting – which would have taken place on Monday and included non-Organization of the Petroleum Exporting Countries (OPEC) members such as Russia – to be abandoned.
OPEC is reportedly continuing efforts to get everyone on board, and Noureddine Boutarfa, energy minister for Algeria, will travel to Tehran on Saturday in an attempt to bring the deal closer to fruition.
The sudden Saudi turnabout came on the heels of rising doubts earlier this week about OPEC agreeing to a cut that would be big enough to be helpful to an over saturated market – which in turn caused Brent and West Texas Intermediate prices to drop.
There is confusion over what caused the Saudis to pull out of the Monday meeting: Bloomberg emphasizes that disagreements about how to share the burden of the cutbacks caused the pullout, while Reuters quotes an anonymous OPEC source as saying that the Saudis want all of the cartel's ministers to agree to the cut and then present the agreement to non-OPEC countries.
Andy Lipow, president of Lipow Oil Associates, thinks the Saudis pulled out because they don't believe non-OPEC members will put significant production cuts on the table: he told CNBC, "It can't be positive, because otherwise you'd show up."
Even more bad news for the Vienna summit comes in the form of Reuters sources stating that Iran and Iraq have raised the conditions for their participation in the cutbacks – but no details have been disclosed about what they want.
Abdulsamad al-Awadhi, a former OPEC official for Kuwait who is now an independent analyst, summarized the growing debacle by remarking, "The whole Algerian deal wasn't clear from beginning, and their approach was 'leave it to later'.
"OPEC leaders are confused, and the group's founding members can't solve differences, but they want to have a deal with non-OPEC; this a tough call."
Longtime cutback critic John Kilduff, founding partner for Again Capital, offered a more outspoken opinion: "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."
It fell upon Kilduff's counterpart, longtime deal booster Helima Croft, global head of commodity strategy for RBC Capital Markets, to make light of Friday's grim developments: she told CNBC that nothing indicates the Saudis aren't committed to finalizing the cutbacks, "But given that there still remains such residual skepticism about a deal, investors will seize on any headline as a sign things will fall apart next week in Vienna."
Earlier this week it was learned that the leading producers in Russia, which has positioned itself as a non-member potentially agreeing to participate in the OPEC deal, have not yet agreed to enact any cuts.
