Oil Sharply Lower Thursday

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent futures were down sharply in early trading Thursday on the risk of a "no deal" outcome from the Organization of the Petroleum Exporting Countries meeting in Vienna.

Nymex January WTI futures dropped 2.44% to $51.63 while ICE February Brent slid down $1.21 to $60.36 barrel (bbl) Thursday morning after Saudi Energy Minister Khalid al-Falih signaled that the 15 member oil producing group would cut less than expected. Al-Falih told reporters that a cut of 1.0 million barrels per day (bpd) would be enough for OPEC and its allied oil producers, while markets had factored in a cut of around 1.2 million to 1.4 million bpd.

The proposal is below a recommendation by an OPEC panel for a 1.3 million bpd cut, with al-Falih saying the kingdom didn't want to shock the market, according to Bloomberg. Al-Falih also emphasized all members would need to participate equally otherwise the risk of a "no deal" outcome is real.

OPEC's de-facto leader, Saudi Arabia is under pressure to take the lead on stabilizing oil markets, but it looked increasingly isolated at the Thursday meeting with non-OPEC partner Russia seeming reluctant to agree to a cut. Iran's oil minister Bijan Zanganeh told the reporters that his country would not cooperate on production cuts citing the U.S. sanctions.

"During the sanction period of time we are not ready to cut our production, but Iran supports any decision made by OPEC members to manage the market, but during the period of sanctions it's not fair (that we) reduce more," he added.

The sell-off is also triggered by the news Meng Wanzhou, Huawei Technologies Co Ltd.'s chief financial officer and daughter of the company's founder was arrested in Canada at the request of the United States. Huawei has come under criticism from the United States for its ties to the Chinese government. Details of why Meng was arrested were unclear but related to sanctions violations, according to Reuters.

Liubov Georges can be reached at liubov.georges@dtn.com