Pre-OPEC meeting fails to deliver oil output cut

Nations supplying a third of the world’s crude oil failed to pledge output cuts after meeting in Vienna. Russia can withstand prices even lower than they are now, the country’s biggest producer said.

Officials from Venezuela, Saudi Arabia, Mexico and Russia said Tuesday only that they would monitor prices. Crude futures sank to a four-year low in New York. OPEC meets tomorrow, with analysts split evenly over whether the group will lower output in response to the crash in prices.

Crude fell into a bear market this year amid the highest U.S. production in 31 years and speculation that Saudi Arabia and other members of the Organization of Petroleum Exporting Countries won’t do enough to curb a surplus. Prices are below what nine of group’s 12 members need to balance their national budgets, data compiled by Bloomberg show.

“All these countries are significantly affected by lower prices and want to see cuts, but it is a big step between having these talks and taking actual coordinated action to achieve this,” Richard Mallinson, geopolitical analyst at London-based Energy Aspects Ltd., said by phone Tuesday. “The key is going to be what happens amongst OPEC members.”

Brent, the global benchmark, dropped 1.7 percent to end at $78.33 a barrel Tuesday on the London-based ICE Futures Europe exchange. West Texas Intermediate sank 2.2 percent to $74.09, the lowest since Sept. 21, 2010.

The discussions didn’t result in any joint commitment to reduce supplies, Rafael Ramirez, Venezuela’s Foreign Minister and representative to OPEC, told reporters after the meeting. All parties said they were worried about the oil price, he said.

“There is an overproduction of oil,” Igor Sechin, chief executive officer of OAO Rosneft, Russia’s largest oil company, said after the meeting. “Supply is exceeding demand, but not critically” and Russia wouldn’t need to cut production immediately even if oil fell below $60 a barrel, he said.

Russia, Saudi Arabia, Mexico and Venezuela between them produced 27.8 million barrels a day of oil last year, according to data from BP Plc. Total global output was 86.8 million barrels daily, the oil company’s figures show. OPEC pumped 30.97 million barrels a day last month, according to data compiled by Bloomberg.

The meeting Tuesday in Vienna comes after weeks of diplomacy from Venezuela, holder of the world’s largest oil reserves, which was attempting to coordinate actions with producers outside OPEC to halt the collapse in oil prices.

Venezuela has been hit hard by the price slide. The country’s oil income has fallen by 35 percent, President Nicolas Maduro said on state television Nov. 19. Yields on the country’s benchmark bonds due 2027 reached a six-year high this month, while foreign-currency reserves are hovering close to an 11-year low.

Ramirez met with energy ministers from Saudi Arabia, Mexico, Russia, Algeria, Iran and Qatar in the weeks leading up to the meeting in Vienna. Venezuela was prepared to cut its own oil production as part of a wider international agreement, he said Nov. 20. (Bloomberg)