Saudis block OPEC output cut, sending oil price plunging

Credit: Reuters/Heinz-Peter Bader/Files

Saudi Arabia's Oil Minister Ali al-Naimi talks to journalists before a meeting of OPEC oil ministers in Vienna in this June 11, 2014 file photo.

Saudi Oil Minister Ali al-Naimi and his United Arab Emirates counterpart, Suhail bin Mohammed al-Mazroui, said on Wednesday they expected the oil market to stabilize itself. A Gulf OPEC delegate told Reuters the Gulf producers had reached a consensus not to cut output.

'OPEC is unlikely to cut today,' one Gulf OPEC delegate told Reuters on Thursday, just hours before the meeting was due to begin. Another delegate agreed and a third delegate said the outcome was too difficult to predict.

On Thursday, Brent oil prices fell to a fresh four-year low under $76.30 a barrel as the likelihood of joint action by the 12-member OPEC waned. [O/R]

The meeting of the Organization of the Petroleum Exporting Countries will be one of the most closely watched in years, with oil prices having sunk 30 percent since June due to the U.S. shale boom and slower economic growth in China and Europe.

Cutting output unilaterally would effectively mean for OPEC, which accounts for a third of global oil output, a further loss of market share to North American shale oil producers.

If OPEC decides against cutting and rolls over existing output levels, that will effectively mean a price war that the Saudis and other Gulf producers can withstand due to their large foreign-exchange reserves. Other members, such as Venezuela or Iran, would find it much more difficult.

'Some OPEC members believe that this is the time where we need to defend market share ... All the experts in the market believe we have oversupply in the market and next year we will have more oversupply,' Iranian Oil Minister Bijan Zangeneh said on Wednesday.

A Gulf OPEC delegate and several OPEC watchers have said they expect the group to roll over existing output levels and stress the importance of better compliance with the current ceiling of 30 million barrels per day. OPEC could also schedule an extraordinary meeting if oil prices keep falling.

(Additional reporting by Alex Lawler, Amena Bakr and Shadia Nasralla; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)