Saudi Arabia’s Energy Minister Khalid Al-Falih agreed in a meeting in Baghdad on joint coordination with Iraq to achieve more stability in the oil market, Iraqi Oil Ministry spokesman Asim Jihad said by phone.
Al-Falih flew into Baghdad for a meeting with Iraqi Prime Minister Adel Abdul Mahdi ahead of talks between OPEC and its allies in Abu Dhabi Sunday to discuss whether to cut production amid a drop in crude prices.
Jihad declined to comment if the two officials talked directly about the possibility of cutting oil output but said that Al-Falih and Abdul Mahdi discussed ways to increase bilateral cooperation on oil and petrochemical industries via investment and possible joint ventures.
Al-Falih will later fly to Abu Dhabi for talks with OPEC and other producers on Sunday, according to a statement from Mahdi’soffice. Iraq, the Organization of Petroleum Exporting Countries’ second biggest producer after Saudi Arabia, has largely rebuilt its energy industry after decades of conflict and sanctions, and has announced ambitious plans to keep expanding its output capacity.
OPEC and its allies meets under mounting pressure to consider renewed production cuts after a slump in oil prices. Crude on both sides of the Atlantic tumbled Friday as the U.S. reported rising stocks and Washington granted waivers that lessen the impact of sanctions on Iranian crude exports. Brent crude plunged below $70 a barrel for the first time in six months, shedding 4 percent last week. WTI futures also tumbled, losing around 5%.
The OPEC+ Joint Technical Committee, which has begun talks ahead of Sunday’s meeting, has given a preliminary 104 percent compliance rate to its cuts deal in October, according to a delegate. The producers’ group implemented a compliance of about 111% of its pledged cuts in September and has agreed to boost supply by restoring 100% compliance.
The International Energy Agency has repeatedly called for OPEC to open the taps to ensure global demand for crude is met. IEA Executive Director Fatih Birol has spoken of the market entering “ a red zone” if output losses from Venezuela and exports from Iran are not offset.
The producer group and its allies has been rapidly ramping up output since May, responding to political pressure from U.S. President Donald Trump and offsetting supply losses from Iran and Venezuela. Now, it’s considering a U-turn.
“The focus is on negative sentiment in oil,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “It’ll be interesting to see if some stick with their shorts over the weekend with the OPEC meeting.”
Ministers from OPEC and its allies will meet and discuss scenarios including the possibility of cutting production again next year, according to delegates. Some members are concerned that inventories are rising, they said, asking not to be named because the discussions are private.
Another reversal would seem to be a far cry from the usual OPEC mantra of preserving stability and careful market stewardship. Yet it does reflect the level of uncertainty in a market experiencing huge shifts in supply and demand.
In the U.S., crude production increased to a record 11.6 million barrels a day last week and stockpiles rose by 5.8 million barrels, according to the Energy Information Administration. OPEC’s own output in October reached the highest level since 2016, while Russia last month pumped 11.4 million barrels a day, a post-Soviet record.
On top of the danger of overproduction, there’s also the risk to demand from faltering emerging-market economies and a trade war between the U.S. and China.
If the group does ultimately decide fresh cutbacks are necessary, it would mark its second production U-turn this year. For Saudi Arabia — the world’s biggest crude exporter — it would be the third time in recent years that the kingdom has delivered a supply surge only to quickly reverse it.
First there are a number of challenges to resolve. The Saudis will need to once again secure the support of rival-turned-partner Russia, which has less need for high oil prices. There’s also the risk of antagonizing Trump, who has repeatedly accused the group of inflating prices.