Update ( 6:20 am ET): Expressing dissatisfaction with the terms of whatever deal has been discussed, Iran is reportedly holding out for language about an exemption for the struggling producer to be included in the agreement following three hours of talks on Friday.

It would be ironic if Iran – which has been blamed, along with Saudi Arabia and Russia, for triggering the collapse in oil prices due to the sanctions ‘exemptions’ on its oil exports extended by the US – ends up killing the deal, because the only less-desirable outcome for oil markets than a ‘baseline’ cut scenario would be ‘no deal’.

Oil prices are all over the place as the perceived prospects for a deal change with each new headline.

Oil

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Oil traders pushed crude prices 5% lower on Thursday after OPEC+ members failed to reach an agreement on production cuts – and outcome that helped stoke rumors that Russia and Saudi Arabia, the bloc’s two most influential members, had struck an agreement to keep production elevated to placate President Trump. But given the intensifying political pressure that threatens to fracture the decades old cartel, leaked reports from Friday’s meeting suggest that Russia and Saudi may have accepted that cuts are necessary –  though doubts remain about whether the 1 million b/d figure that has been bandied about would have any enduring impact on prices amid fears that global markets would remain hopelessly oversupplied.

The dominant rumor following Friday morning’s meeting suggested that OPEC was leaning toward total cuts of 1 million b/d (or more) with members contributing 650k and non-OPEC members (mostly Russia) contributing 350k. Iran, Venezuela and Libya each demanded an exemption from the cuts, citing economic hardship (yet Saudi Arabia has resisted calls for it to shoulder the bulk of the cuts, and insisted instead that they be evenly spread throughout the bloc, and reports later Friday said OPEC and Russia would seek a “symbolic” commitment to cuts from Iran).

Still, in one sign that the bloc’s two most dominant members might not be willing to cooperate, Russia and Saudi Arabia have refused to jawbone the market lower: Russian Energy Minister Alexander Novak said that while Russia would consider cuts of 100k-150k b/d, this deceleration would need to be short-lived, with production possibly ramping back up after three months because “market conditions may change.”

And even if they do relent, analysts have expressed doubts about whether 1 million b/d in cuts would remove enough supply from the market. One analyst with Commerzbank said oil would “likely fall further” if OPEC+ only cut production by 1 million b/d because “this will not be sufficient to rebalance the market.” An analyst at Jeffires agreed, saying cuts of 1m b/d oil could lead to a sell-the-news reaction in the short term, particularly if details are “sketchy.”

OPEC

According to the Financial Times, influential Saudi energy minister Khalid Al Falih said he was “not confident” of an agreement. Others have said they still believe an agreement for a 1 million b/d cut could still be reached.

Oman, which is not an Opec member but plays an influential role as a go-between among the different factions, cautioned countries against being “macho” late Thursday, arguing that production cuts were in everybody’s interest. Alexander Novak, Russia’s energy minister had reportedly met with Vladimir Putin following the start of the Vienna meeting to discuss Russia’s position on cuts (the Russian leader said last month that he was “fine” with prices at $60 a barrel). Novak and Falih reportedly met Friday, though the details of what was said were unclear.

As production in the Permian Basin relentlessly accelerates, other producers worry that any revenue they gain from cuts will be offset by ceding more market share to their American competitors. And hopes that a rebound in oil prices (due to its connotations for capex spending and, more broadly, economic growth) might rescue the equity market have added another possible repercussion to the dilemma.

Brent crude futures swiftly priced in this uncertainty, falling 3% to trade below $60 a barrel early Friday before chatter about a possible larger-than-expected deal helped push prices back into the green.



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