After months of talking up their ability to boost crude supplies to the market, OPEC and its partners now appear ready to reverse course and reinstitute output cuts.
For some members, that can't happen soon enough.
Saudi Arabia and Russia, both of whom have boosted their crude production in recent months, were to blame for the recent slump in the price of oil and "should cut at least 1 million b/d instantly," an OPEC delegate told S&P Global Platts.
The two countries, which are the largest producers in the OPEC/non-OPEC coalition, need to "get back [to] OPEC the $15/b loss that they caused," the senior delegate said on condition of anonymity.
ICE Brent futures were trading at $71.80/b at 1635 GMT on Wednesday, after hitting a four-year high October 3 at $86.29/b.
The comments highlight tensions within the OPEC/non-OPEC coalition, as a six-country monitoring committee co-chaired by Saudi Arabia and Russia meets this weekend to assess market conditions and decide next steps.
Pressured by key Saudi ally the US, OPEC and 10 non-OPEC partners led by Russia on June 23 agreed to raise production by a combined 1 million b/d by reducing overcompliance with production cuts. The move was intended offset expected losses by sanctions-hit Iran and economically reeling Venezuela and keep prices from rising too high, but some delegates concede the efforts may have gone too far.
The Joint Ministerial Monitoring Committee, which meets Sunday in Abu Dhabi, may recommend the production increase since June be bottled back up, as many analysts foresee a weak market in the early part of next year, when demand is expected to seasonally wane.
The next full OPEC meeting, when any policy decision would be voted on, is December 6 in Vienna.
"We will not oversupply the market," one delegate said. "We have an agreement in place, and we can adjust production as we have done very well since January 2017."
Another added: "We will certainly have a discussion not only on Q1 2019 but [the whole] year, and what we can propose in December to prevent market imbalance."
The US on Monday also granted sanctions waivers to eight countries to continue purchasing Iranian crude, which could add to any potential oversupply in the market.
The waivers, plus surging US production, "will force OPEC to reverse its latest increase in oil production by roughly 1 million b/d again if it does not want to risk a massive oversupply and a further slide in oil prices," analysts with Commerzbank said in a note Thursday.
IRAN HAS A BEEF
Saudi energy minister Khalid al-Falih said last month the kingdom was producing about 10.7 million b/d, near its record high and almost 700,000 b/d more than it was producing in May. Russia, meanwhile, reported Friday that it hit an all-time high of 11.41 million b/d, up about 440,000 b/d from May.
Saudi officials did not respond to requests for comment.
Mohammad Darwazah, an analyst with Medley Global Advisors, said with many OPEC members having raised their output since the June decision, convincing all of them to rein in production again could be a challenge. Saudi Arabia and Russia may have to lead by example, as they did when they first instituted production cuts starting January 2017.
"The Saudis have to be careful, but they are very mindful of how the fundamentals are looking for the first half of 2019," Darwazah said. "It's a question of whether they can get everybody back on board if they have to cut."
Besides Saudi Arabia and Russia, who co-chair the JMMC, the committee comprises Kuwait, Venezuela, Algeria, Oman.
Iran has said it would be illegal for OPEC members to exceed their production quotas, as Saudi Arabia and its Gulf allies have, and its oil minister Bijan Zanganeh earlier this week called on the JMMC, as well as the delegate-level Joint Technical Committee that advises it, to be dissolved for endorsing the output increase that has infringed on Iran's market share.
Iran does not sit on either committee and its representatives have declined to say whether the country plans to send anyone to observe the Abu Dhabi proceedings, as it has for previous JMMC meetings.
Even before the US sanctions went into force Monday, Iran's oil sales were already suffering, with many customers halting their purchases in recent months. The country's crude production tumbled 210,000 b/d month on month to 3.29 million b/d in October, lowest since March 2016, according to the latest S&P Global Platts OPEC survey released Wednesday.
Venezuela, too, has complained of other OPEC members raising production at the expense of others. The country, whose oil minister Manuel Quevedo sits on the JMMC, is suffering from crushing debt, hyperinflation, labor shortages and deteriorating infrastructure that have caused its crude production to plunge 650,000 b/d year-on-year to 1.18 million b/d in October, the Platts OPEC survey found.
