In April, talks failed over a freeze in production, but now the negotiations are for actual cuts, the bulk of which would have to be made by Saudi Arabia. Croft said it seems that the disagreement is whether Iran accepts a production level 200,000 below what it says it currently produces. However, Iran says it produces 3.9 million barrels, and other sources put it closer to 3.7 million barrels a day.
"We're potentially going to fall apart over 200,000 barrels. This is what it comes down to. We're in the realm of ego. … This is kind of lunacy. They're not fighting over a million barrels," Croft said.
Iraq's role is also so far unresolved, despite comments from its oil minister that he was optimistic for a deal.
"It's between those three," said another analyst, referring to Iran, Iraq and Saudi Arabia.
"It's not going well so far," said the analyst, speaking from Vienna. "The issue has been if they are not going to cut, then what is the level that is established for them in terms of the base? What are they not cutting from? … When you're negotiating, do you want to reach a deal or not? If you want to reach a deal, you might have to compromise something. That seems to be the problem. Does everybody want to do a deal or not? There are some people who seem to think not at those terms."
Croft said the stakes are much higher at this meeting than they were in the spring. The Saudi population is hurting from cutbacks in domestic spending. Since the collapse in oil prices, the kingdom has rolled back energy and other subsidies. Bin Salman needs a higher oil price to make his goal of shifting to a more diverse economy work.
"I think the problem is who wants it more," Croft said. "We saw in September (Saudi Arabia) wanted it more. Maybe they wanted it more in September because they were doing a bond issuance." In fact, as it launched a $17.5 billion debt deal in October, the Saudi oil minister made bullish comments on oil, saying the long decline in oil prices was nearing an end.
"I think they'll probably still come up with an announcement. If there's no announcement, the market will fall below $40 a barrel very quickly," said Francisco Blanch, head of global commodity and derivatives research at Bank of America Merrill Lynch.
"They won't do it at any cost. That's shifted the tone of the negotiation and that's why we're seeing all these headlines, and the market is unraveling. There's a very obvious situation here where the Saudis are better funded than the other OPEC players. They've done their bond deal, and the expectation from Iran and Iraq was that the Saudis were going to bend over backward to get it done," said Blanch. Blanch said Saudi Arabia's very cooperative posturing in September at a meeting in Algiers may have been tactical, ahead of its bond offering.
Iran, Croft said, may not appreciate that there's a chance the U.S. could put it back under sanctions, once President-elect Donald Trump takes office.
"There's a new sheriff in town in the U.S., so that new sanction relief is not guaranteed by any measure," she said.