OPEC, the Organization of the Petroleum Exporting Countries, has apparently agreed not to make a cut in oil production. The Gulf oil producers, including Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, reportedly reached the agreement ahead of the start of OPEC's meeting in Vienna on Thursday.
The decision by the 12-member organization to keep oil production at current levels reduces the likelihood OPEC will boost oil prices, which have dropped by more than one third since June.
The Gulf oil producers reached their decision just one day before the start of meetings in Vienna. Saudi Arabia’s oil minister told reporters the Gulf Cooperation Council is capable of having a unified position. Saudi Arabia is the largest OPEC producer so analysts say the impact of not cutting production would be minimal.
However, it could do more damage to producing nations with higher costs, like Iran, Iraq and Venezuela. All eyes are on whether OPEC will have a unified position after the meeting.
"Saudi Arabia would like to keep it going. And some countries like Venezuela and Iran will have a lot of subsidies and high budget who need a high oil price, and won’t want to go down. It is going to be a very tough negotiation. My bet will be that we will either not see a reduction or a very small reduction," Cornelia Meyer, CEO of MRL Corporation, said.
OPEC accounts for a third of all global oil output. Analysts say if the Gulf producers don’t cut production, the move will help protect market share for OPEC members. But oil prices could continue to fall which could lead to a price war.