The Organization of Petroleum Exporting Countries (OPEC) will meet on Saturday non-OPEC nations in Vienna with the hope that they will also agree to follow the cartel and cut supply for the first time since 2008.
At their meeting last month, OPEC pledged to cut oil production by 1.2 million barrels per day (b/d) from January 2017 and the 14-member cartel hopes non-OPEC nations can also agree to limit supply to further prop up oil prices.
“We’re hoping for 600,000 (barrels per day to be cut) from non-OPEC (countries) so that is going to be a substantial volume that will bring health back into the market,” Khalid Al Falih, Saudi Arabia’s minister of energy told CNBC on November 30, the day of the OPEC deal.
Russia has said it is prepared to commit to a 300,000 b/d production cut which should, in theory, mean all of the other non-OPEC countries combined would only have to match Russia’s pledge in order for OPEC to hit its target.
However, only five of the 14 non-OPEC oil producing countries have agreed to attend the meeting on Saturday, according to a Reuters report which cited two OPEC sources.
The balancing act for OPEC at its last meeting had been to agree on individual production levels for each country while remaining vigilant to non-OPEC exporters looking to seize a greater share of the market.
“If non-OPEC countries decided to take advantage of OPEC cuts to expand their own market shares, this would seriously undermine discipline among the oil cartel members. In the short term, though, all involved will be trying to support expectations of tighter supply,” a team of Commerzbank analysts said in a note.
The last time OPEC and non-OPEC nations were able to agree to cut oil production together was in 2001 and, on that occasion, the non-OPEC countries fell significantly short of OPEC’s preferred target.
Oil prices were slightly higher on Friday as investor optimism appeared intact that OPEC and non-OPEC producers would be able to reach a deal in Vienna, Austria.
Brent crude was trading around $54.06 a barrel, up 0.32 percent in early afternoon European trading on Friday, while U.S. WTI was selling at $51.21 a barrel, up 0.73 percent.