One day after Saudi Arabia revealed that it had not complied with its production quota in October for the first time since OPEC's November 2016 meeting in Vienna, triggering an all-out 7%+ collapse in already badly beaten crude, Reuters briefly sent oil prices into the green Wednesday morning with a report that OPEC and its partners were discussing a proposal to cut oil output by up to 1.4 million barrels per day in 2019 to avoid a surplus that could tank prices.
Unnerved by oil's record 12-day losing streak, OPEC and OPEC+ are again talking about cutting production just months after Saudi Arabia and Russia agreed to pump more. The group is set to meet on Dec. 6 to agree on its policy for 2019.
West Texas Intermediate futures rose as much as 1.4% to $56.49/bbl, erasing an earlier 1% decline though the rally soon faded and prices slumped back into the red. If oil settles higher on the day, it would break what has been a record losing streak for oil prices.
Still, more may be needed as gains have failed to hold, as the report noted that least one OPEC member (Iran) still needed to be convinced to support the plan.
A supply cut of up to 1.4 million bpd was one of the options discussed by energy ministers from Saudi Arabia, non-OPEC Russia and other nations at a meeting in Abu Dhabi on Sunday, the sources said.
"I believe a cut of 1.4 million bpd is more reasonable than above it or below it," one of the sources, who declined to be identified by name as the talks are confidential, said.
OPEC member Iran, as well as Russia, would need to be brought on board for the new plan, the sources added. One source said Iran does not want to have a production target in a new agreement as it is facing lower exports due to U.S. sanctions.
Meanwhile, in overnight comments, OPEC chief Mohammed Barkindo did his best Mario Draghi impression, confirming once again that the oil cartel sees itself as a central bank.
*OPEC CHIEF: OPEC+ WILL DO 'WHATEVER IT TAKES' FOR MARKET BALANCE
Unfortunately for OPEC, the market will need far more convincing OPEC can in fact do "whatever it takes" at a time when the US president will tweet whatever he wants to, to make sure that OPEC fails to push oil prices higher.