— This is the script of CNBC's news report for China's CCTV on December 6, 2018, Thursday.
Not surprisingly, on the eve of the OPEC meeting, US President Donald Trump, who has been unhappy with high oil prices said on social platform Twitter that the world does not want or need higher oil prices." Trump's comments also signal pressure on OPEC not to agree on further cuts. However, the latest information shows that OPEC has arguably ignored the criticism from Trump and has agreed to cut production again, but no agreement has yet been reached on how much to cut. OPEC's determination to cut output stems from the recent plunge in oil prices.
If you look at WTI futures, overnight prices were down more than 30% from its high in early October.
Brent futures dropped more than 28% from its early October record.
So the short-term plunge in oil prices has led OPEC members, including Saudi Arabia, to resume production cuts to push up prices, and even Nigeria and Libya, who are currently exempt from cuts, have now agreed to cut. Oman's oil minister told the media at the meeting that in addition to the OPEC agreed to cut production, Russia will also participate in the six-month production reduction plan starting next January.
OMAN OIL MINISTER, MOHAMMED BIN HAMAD AL-RUMHY
JOURNALIST: DID YOU RECOMMEND THE CUT?
AL-RUMHY: WELL, THE CUT YES, BUT WE HAVEN'T DISCUSSED THE NUMBERS YET.
JOURNALIST: IS THERE A NUMBER?
AL-RUMHY: NOT YET. WORK IN PROGRESS
However, there are still differences between Russia and Saudi Arabia over how to allocate the scale of the cuts. Russia's attitude is the key to reach the New Deal.
OPEC could eventually agree to cut about 1m barrels a day, accounting for 1 percent of global production, sources said. Saudi Arabia, however, believes Russia is placing too much of a burden by capping production at 150,000 barrels a day. So the message is that Saudi Arabia is in final discussions with Russia on the size and mechanism of the cuts, and we may find out whether there is a deal and how much countries need to cut when the meeting over later this week.
Finally, a change worth emphasizing is Qatar's minister of state for energy affairs, SAAD AL-KAABI, announced that Qatar would withdraw from OPEC in January 2019. In an interview with CNBC, he said the reasons for the withdrawal is "not political."
QATAR ENERGY MIN
LOOKING AT THE GAS BUSINESS AS THE MOST IMPORTANT THING FOR IN THE FUTURE OF QATAR I THOUGHT THAT THAT WAS AN IMPORTANT THING. REALLY FOCUS AND JUST KEEP DRIVING ON THE GAS BUSINESS. AND I SUGGESTED TO OUR LEADERSHIP THAT WE SHOULD EXIT OPEC.
After Qatar's withdrawal, OPEC will have the remaining 14 members, and Qatar wants to focus on its plans to develop and increase its natural gas production. But anyway, Qatar's withdrawal raises concerns about the sustainability of OPEC'S influence. We will also keep an eye on the outcome of the OPEC meeting.