Crude Plunges After Saudi's Propose Smaller-Than-Expected Production Cut

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OPEC - together with a group of non-OPEC producers led by Russian Federation - started withholding oil supplies up to 1.8 Million barrels per day since 2017 to prop up prices and reduce oil inventories.

If the 20 or so OPEC members and other nations at the Vienna talks - which account for more than half of the world's oil - continue to pump at current record levels, they risk seeing prices continue to tumble.

OPEC members are meeting to agree on their response to recent declines in oil prices, with analysts predicting a cut in production of at least 1 million barrels per day.

"The US is now a major player in the export market", said Brian Kessens, who helps manage $US16 billion at Tortoise in Leawood, Kansas.

Russia's second-largest oil producer, Lukoil PJSC, is ready to comply with any request from the Kremlin but hopes output cuts won't be necessary, said Chief Executive Officer Vagit Alekperov.

Sources said the group had agreed on the need to curb production but had yet to reach an agreement on the exact figure.

According to Ardabili, "the five or six countries which have benefited from the situation should slash their output by 1.4 million to 1.8 million barrels per day at the minimum in order to return prices to an upward trajectory".

Brent crude, the worldwide benchmark, has plunged from $86 at the start of October to around $60 recently, over concerns at a glut in supply and faltering in demand.

The boom in shale production in the U.S. has made the country the world's largest crude producer, surpassing both Saudi Arabia and Russian Federation for the first time in decades.

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While Saudi Arabia has indicated it is willing to cut production, its decision may be complicated by Trump's decision to not sanction the country over the killing of dissident journalist Jamal Khashoggi.

The Trump administration has sent the country's special envoy for Iran Brian Hook to Vienna, where he held talks with the Saudi energy minister one day before OPEC's 175th meeting.

The Saudi energy minister stressed that he doesn't support any exemptions from further slashing of oil output.

"We must be excluded from any decision to cut production as long as illegal U.S. sanctions are not lifted", Iran's Oil Minister Bijan Namdar Zanganeh said on Wednesday evening as he arrived in Vienna.

However, analysts at ING told AFP news agency that the United States administration could possibly use the murder of journalist Jamal Khashoggi as leverage. Whether to exempt Iran from making any cuts was one sticking point in the meeting, said a delegate.

"This sits against a backdrop of rapid non-OPEC production growth - 2.4 million barrels per day year-on-year in 2018 and 2019, due mostly to gains in the USA output over both years".

"They should know that OPEC is not part of their secretary of energy", he said. Saudi Arabia is the de facto leader of OPEC so its opinion goes a long way, however, due to the critical nature of this decision, it is likely to wait for Russia's opinion which may come later in the day.

The US, not a member of OPEC but a significant oil producer itself, has repeatedly called for oil prices to stay low, with Trump using Twitter several times to make the point.