"It's all become Russian psycho-drama," said Helima Croft, head of global commodities strategy at RBC. "Russia has so fully taken over the meeting. Everyone is discussing whether Russia is going to be along for this ride."
OPEC for weeks had been expected to add nine months to the agreement with Russia and other producers to keep 1.8 million barrels a day off the market through March. But Russian oil companies, like Rosneft and Gazprom Neft, complained that the deal, which helped lift oil prices, also let U.S. shale increase production and steal market share.
Russian President Vladimir Putin had even said a nine month extension would be fine, but rising U.S. output, again nearing record highs, and a surge in exports may have been a bigger factor than expected for Russian companies.
"What they're going to do is kick the can down the road in some way that saves face," said Michael Cohen, head of global commodities research at Barclays. He said that the outcome could be a shorter six month extension, and that would be negative for the market.
"Our initial view is that would be bearish…but frankly given the market moves of the last week, the bearishness may have already gotten out of the system," said Cohen, in a phone interview from Vienna.
Saudi Arabia energy minister Khalid al-Falih and Russia energy minister Alexander Novak were among those at a Joint Ministerial Monitoring Committee meeting Wednesday, and while they agreed more efforts to balance the market are necessary, it was unclear what a final statement might look like.
"Last May, Novak and al-Falih walked in together," said Croft. "They walked in separately this time. There was a lot of body language there."
Croft added, "I think the pressure on al-Falih to deliver is very high…To me what was amazing was he just publicly said there was no room for complacency…he has already raised the stakes."
Saudi Arabia was the driver of the original production-cut deal, which it sought after its strategy of letting market forces determine price led to a collapse in crude into the $20s. Russia agreed to go along, as low oil prices were hurting the economies of all oil producers, but analysts say Russia has adjusted, and it can live with oil prices in the $50s.
Saudi Arabia, however, wants to see stable prices around $60 per barrel, which will help it in its efforts to transform its economy under its Vision 2030 program. The OPEC meeting also comes at a critical time for Saudi Arabia, as the world watches the power shift ahead of young Crown Prince Mohammed bin Salman's ascension to the throne.
Bin Salman has been holding members of the royal family, business leaders and military on corruption charges at a luxury hotel in Riyadh. Prince Miteb bin Abdullah, son of the late King Abdullah and once a contender for the throne, was released after settling for $1 billion. Others are also reportedly making financial deals in exchange for their release.
Saudi Arabia has pushed for the nine month extension, but the final outcome is expected to be driven by Putin, and there is pressure on Russia to go along.
"You're Vladimir Putin. Are you going to let your corporates tank the oil price going into the election? If you tank the oil price, are the Gulf states going to buy your weapons? Are their sovereign wealth funds going to invest in your infrastructure?" Croft said.
"I think they are struggling with this. The Russians are going to drag this out," Croft said. "al-Falih upped the stakes on the Russians today."
The very public dithering by Russia has been weighing on oil prices. Crude futures sold off again on Wednesday. West Texas Intermediate futures fell 1.2 percent to settle at $57.30 per barrel.
"I think that at this point, all of the ministers want to make their bosses happy. The same can be said of Mr. Novak and Mr. al-Falih. I think there's a bit of managing of expectations that's going on right now, so at the end of the day, they can deliver on market management mode for the next year," Cohen said.