Crude oil prices gained momentum in early Asian trade despite rising doubts over the production cut deal due to a disagreement between Saudi Arabia, Iran, and Iraq. Crude oil prices fell over 3% during Tuesday trade after Saudi Arabia threatened not to take part in any deal without Iraq and Iran. On the other hand, Iran’s oil minister says they are not prepared to cut production.
According to Reuter’s report, Iran suggested to OPEC to cut Saudi Arabia’s oil output by 1 million barrels a day to 9.5M bbl/day, but the Saudi oil minister said they are only prepared to cut output by 500K bbl/day. Iran is likely to get an exemption from the production deal until they reach pre-sanction levels. However, Saudi Arabia wants Iran to freeze their production at current levels.
Crude oil prices gained a little momentum in Asian trade despite doubts over the production deal. WTI crude oil prices surged $0.80 cents in Asian trade from the recent settlement, while Brent spiked $0.87 cents.
Crude oil price could move either way depending on the nature of an agreement between global producers. Several analysts, including Barclays, Goldman Sachs, and ANZ have the same opinion that crude oil prices would rapidly surge to around $50 per barrel if OPEC comes to an agreement. On the contrary, crude oil prices could swing to $40 a barrel if the deal falls through.
OPEC producers are looking to cut global supplies by 1 million barrels a day to prop up prices and stabilize supplies. Considering Iraq and Iran’s behavior, the burden of the production cut could fall on Saudi Arabia, but the country also expressed that it would not participate unless Iran and Iraq do their part.
Saudi economy could sink if OPEC fails to reach a production cut agreement. Iran, the biggest geopolitical rival of Saudi Arabia, knows that the kingdom’s economy has suffered amid lower prices. Thus, they want to put more pressure on the Saudis to cut their production to stabilize global markets.
Prospects have been good so far in early European trading with generally positive comments from various OPEC officials and ministers as they meet in Vienna. In the last two hours, WTI spiked from under $46.00 per barrel to around $47.75 per barrel with a correction down to $47.35. Brent oil briefly peaked over $50.00 per barrel, falling back to $49.70. Further volatility expected during the day.