As the price of oil languishes at a three-month low, traders are wondering whether petroleum producers will extend their six-month agreement between OPEC and non-OPEC producers to cut output when it comes up for renewal on May 25.
Following the release of data showing a faster-than-anticipated build-up in U.S. crude inventories, WTI was trading 1.08 percent lower by midday on Wednesday with Brent down by 1.12 percent.
Negative noises out of Saudi Arabia regarding an extension of the deal given its apparent disappointment over the compliance demonstrated by other partners in the deal has caused tremors through the market.
Yet the agreement will most likely be extended, according to analysts at RBC Capital Markets, in a note published on Tuesday.
"In the past week, both the oil ministry and the oil minister have doubled down on Saudi's determination to do whatever it takes to ensure its success," claimed the research note.
"Elevated inventories likely will be the official reason for the roll over – certainly taking center stage among the technocrats in the oil ministries – we contend that domestic economic considerations will also be decisive factors at play for the leaders of these petro-states," the analysts added.
Looking to the key players involved, RBC advises keeping a close eye on both Saudi Arabia's Deputy Crown Prince, Mohammed bin Salman, and the oil minister, Khalid al-Falih, who is also chairman of Aramco, the country's national oil and gas company.
Turning to Russia, where compliance has lagged, President Vladimir Putin and energy minister Alexander Novak are the decision-makers to watch. Novak recently claimed that Russia will deliver on its compliance obligations by April, although some observers remain skeptical given the dismissive attitude with which Russian officials had contemplated the concept of cooperation with OPEC as recently as a year ago.
Iraq's willingness to play ball is also being closely watched, particularly in light of the continued insistence of oil minister Jabbar al-Luiebi that Iraq deserved an exemption from output cuts, similar to Libya and Nigeria.
However, RBC's research team believes that Iraq will eventually cooperate.
"One legitimate worry would be Iraq taking on the role of 'spoiler.' In the end, we think domestic concerns will prevail in Baghdad and that the Prime Minister would intervene again if necessary to ensure that the deal is rolled over," analysts opined, before delivering a cautiously optimistic verdict.
"It remains our base case that the deal is extended for another six months when OPEC meets in May, but given the recent Iraqi comments as well as the slow Russia compliance, there may be some message indiscipline and provocative headlines about things falling apart en-route to Vienna," added the note.
Meanwhile, Bhanu Baweja, global head of EM Cross Asset Strategy at UBS told CNBC's Squawk Box on Wednesday that, while he doesn't see prices slipping below $40 per barrel, they could dip below $45 per barrel for a short time.
"But there's a pretty strong cap in oil prices and I think therefore now we will swing with inventories so there is a short-term risk that we get towards $45 and I don't think the markets are at all priced for that right now," Baweja added.
Delving into the all-important break-even cost of production considerations, Baweja highlighted that Saudi Arabia is probably the only place that currently has excess capacity.
"Now with the marginal cost of production falling in the U.S. all the time as well it means that there is a cap and that cap is getting lower all the time – it used to be $70 and I think it is probably sub-$60 now."