OPEC talks on oil production cuts reached deadlock on Dec. 7 as the group's leader Saudi Arabia refused to grant sanctions-hit Iran exemptions from planned reductions, OPEC sources said.
Saudi Energy Minister Khalid al-Falih, asked on Dec. 7 whether he was confident the day's meetings would produce a deal, said: "No."
The Organization of the Petroleum Exporting Countries was meeting in Vienna for a second day running, before discussions later in the day with non-member oilproducers led by Russia.
On Dec. 6, OPEC tentatively agreed an output cut but could not decide concrete parameters as it was waiting for a commitment from Russia, sources from the group said.
On Friday, four OPEC and non-OPEC sources said Saudi Arabia's arch-rival Iran, which came under fresh U.S. sanctions in November, was also holding up a final deal.
"Iran will insist on an exemption until sanctions are removed," one of the OPEC sources said. Another source said Tehran wanted an OPEC communique to specify that Iran was exempt from cuts.
Saudi Arabia faces pressure from U.S. President Donald Trump to help the global economy by refraining from cutting supplies.
An OPEC output reduction also would provide support to Iran by increasing the price of oil.
Possibly further complicating any OPEC decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October. Trump has backed Saudi Crown Prince Mohammed bin Salman despite calls from many U.S. politicians to impose stiff sanctions on Riyadh.
U.S. special representative for Iran Brian Hook met Falih in Vienna this week, in an unprecedented development ahead of an OPEC meeting. Saudi Arabia first denied the Hook-Falih discussion took place but later confirmed it.
"U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the market," said Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher.
The price of crude has fallen almost a third since October to around $60 a barrel as Saudi Arabia, Russia and the United Arab Emirates raised output to offset lower exports from Iran, OPEC's third-largest producer.
The price decline prompted OPEC and its allies to discuss output cuts, and Falih said on Dec. 7 possible reductions by those involved ranged from 0.5-1.5 million bbl/d.
"The Iran exemption is the biggest hurdle ... If there is no agreement, the timeline for a deal will be pushed to the first quarter of 2019," Energy Aspects said in a note.
A reduction of 1 MMbbl/d would be acceptable and so far was the main scenario, Falih said, but he added that Russia needed to commit significant volumes.
OPEC delegates have said the group and its allies could cut by 1 million bpd if Russia contributed 150,000 bbl/d of that reduction. If Russia contributed around 250,000 bbl/d, the overall cut could exceed 1.3MMbbl/d.
A Russian Energy Ministry source said on Friday Moscow was ready to contribute a cut of around 200,000 bbl/d and that Iran, not Russia, now seemed the main hurdle for a deal.
Russia, Saudi Arabia and the U.S. have been vying for the position of top crude producer in recent years. The United States is not part of any output-limiting initiative due to its anti-trust legislation and fragmented oil industry.
On Dec. 6, U.S. government figures showed the country had become a net exporter of crude oil and refined products for the first time on record, underscoring how the surge in production has altered the supply equation in world markets.