OPEC has another go at oil deal after 'brain squeezing'

Ministers from the powerful OPEC group of oil producers got together again Friday, a day after failing in a marathon meeting to agree on a fresh output reduction deal they hope would stem prices which have been under pressure from abundant reserves and weak global economic growth.

Friday's so-called OPEC+ meeting included Russia, the world's second-largest oil producer and not a member of the cartel.

Saudi Oil Minister Prince Abdulaziz Ben Salman, who is attending his first meeting in the post, admitted that Thursday's six-hour meeting had seen delegations "labouring... until 11 o'clock in the evening, squashing their heads, squeezing their brains" in search of an agreement.

However, ministers seemed hopeful about the prospects of an eventual deal on an overall output level and each member's share.

Arriving at Friday's meeting, the chairman of Libya's National Oil Corporation Mustafa Sanallah said of the negotiations that there was "no problem at all, just discussions".

OPEC countries have been mulling an additional cut that would go beyond their agreement to reduce output by 1.2 million barrels per day from October 2018 levels.

That deal was originally fixed in December last year, was extended at OPEC's last meeting in July, and is due to expire in March 2020.

On Thursday, Russian Energy Minister Alexander Novak said a preliminary gathering of ministers had recommended an additional cut of 500,000 barrels per day be considered for the first quarter of 2020.

Novak added that level could be re-examined during an "extraordinary meeting" in March.

On Friday Novak said it was "extremely important in today's condition to send a very clear message to the market and to determine and show what the next step should be".

Oil prices have however not been significantly affected, because markets consider any cut "more of a housekeeping move that will narrow the gap between (producers') current target and the over-compliance we have seen from the alliance," Oanda analyst Edward Moya told AFP.

Prince Abdulaziz used the opening of the meeting to hint at Saudi irritation that not all countries have been sticking to the production quotas agreed under the current deal.

While Saudi Arabia has voluntarily pumped below its quota other producers -- including Russia, Iraq and Nigeria -- have been exceeding theirs.

"Like religion, if you are a believer you have to practice, without practice you are a non-believer," Prince Abdulaziz said, stressing the importance of "further conformity" if OPEC were to achieve its goals.

If OPEC and its allies are to effectively tighten supplies, there are "still lots of details to be ironed out on how that might be apportioned," Argus Media analyst David Fyfe told AFP.

Neil Wilson at Markets.com added: "We'll wait to see if any arm-twisting by the Saudis forces Iraq and Nigeria into complying -- but why would they bother now when they've not complied thus far?"

Saudi Arabia, in particular, has an interest in underpinning crude prices in the wake of its initial public offer (IPO) of shares in state-owned oil giant Aramco.

The group, which alone accounts for around 10 per cent of the world's crude oil, said Thursday it had raised $25.6 billion in the world's biggest stock sale ever.

The IPO puts Aramco's total value at $1.7 trillion, well above number two Apple.

"We shall see where the shares head on day one," Wilson remarked.

Despite the glitzy headlines, OPEC remains under pressure from factors that include a trade war that has curbed the oil-thirsty Chinese economy, and weak activity across Europe.

Meanwhile, oil production in the United States, which became the world's biggest producer in 2018, Brazil and Canada are at record levels, and Norway plans to increase its production as well.

Oil prices have nonetheless remained steady since OPEC's meeting in July, hovering around $60 a barrel for the European benchmark Brent crude.