The energy alliance between OPEC kingpin Saudi Arabia and non-OPEC heavyweight Russia faces its "toughest test yet" next week, analysts have told CNBC, ahead of a much-anticipated meeting between the influential oil cartel and its allies.
OPEC and non-OPEC members will meet in Vienna, Austria, on Thursday, with the aim of reaching an accord over possible output cuts in order to prop up tumbling oil prices.
Crude futures have fallen more than 25 percent since climbing to a four-year peak in early October, amid intensifying oversupply concerns and worries over slowing economic growth. This collapse in prices has ratcheted up the pressure on OPEC and its allied partners to orchestrate a fresh round of production cuts at its final meeting of the calendar year.
"As things stand, the Russian and Saudis are still far from being on the same page over the finer details of looming output restrictions," Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note published Friday.
It leaves the de facto OPEC leader and allied non-OPEC producer facing its "toughest test yet" to find a compromise, Brennock added.
International benchmark Brent crude was trading at $58.68 a barrel at around 12 p.m. London time (7 a.m ET), down around 1.4 percent, while West Texas Intermediate (WTI) stood at $50.52, more than 1.7 percent lower.
Saudi Arabia has been leading calls for the oil cartel to trim output in a bid to alleviate concerns of oversupply. Yet, while the oil-rich kingdom has recently warned it would not be prepared to cut crude output alone, it has previously promised to do "whatever it takes" to prevent the return of a supply glut.
However, Moscow does not share Riyadh's enthusiasm for a reversal in production strategy.
Simmering global trade tensions and U.S. sanctions against Iran have helped Russia consolidate its leading position in China's energy market in recent months.
So, it is little surprise Russia has been reluctant to sign off on a fresh round of supply cuts, analysts said, with the non-OPEC heavyweight instead preferring to maintain current production levels "at the very least."
Russia has also warned the Middle East-dominated group that it must be careful to ensure it does not end up changing its course by 180 degrees whenever it meets.
"OPEC is grappling over how to manage the expected weaker fundamentals in the oil market next year, yet the uncertainty about what the group will do at its meeting next week is causing markets to be more anxious," Peter Kiernan, lead energy analyst at the Economist Intelligence Unit, told CNBC via email Friday.
"Saudi Arabia sees the need to cut output, but it wants co-operation from other OPEC members and Russia to do so, while also avoiding any conflict with the Trump administration over the direction of oil prices," he added.
President Donald Trump — who is publicly in favor of low fuel prices — has urged OPEC not to reduce crude production next month.
A day after standing by Crown Prince Mohammed bin Salman in the face of allegations that he had ordered the killing of dissident journalist Jamal Khashoggi, Trump publicly thanked Riyadh for helping to keep a lid on oil prices.
But, the U.S. president has called on Saudi Arabia to push prices even lower over the coming months.
"Against this backdrop, the most likely outcome of next week's OPEC meeting is a fudge. Russia and Saudi Arabia will agree to curb production but by less than is needed to prevent a supply imbalance in early 2019," PVM Oil Associates' Brennock said Friday.
"Christmas is unlikely to come early for beleaguered oil bulls," he added.
About two dozen exporting nations began capping their output in 2017 in a bid to drain a global crude glut.
The group relaxed this strategy in June, but in September, some of the world's leading oil producers were talking about pumping extra oil onto the market in order to help soothe intensifying supply shock fears.