DUBAI/LONDON (Reuters) - OPEC and its partners are discussing a proposal to cut oil output by 1.4 million barrels per day (bpd), three sources familiar with the issue said, although Russia may not be on board for such a large reduction.
Worried by a drop in oil prices due to slowing demand and record supply from Saudi Arabia, Russia and the United States, the Organization of the Petroleum Exporting Countries is talking about a U-turn just months after increasing production.
Such a shift could anger U.S. President Donald Trump, who urged OPEC on Monday not to cut supply. It also risks handing market share to the United States, while the sources said Russia might not be willing to back such a move.
A steep slide in prices has surprised many oil market participants. Brent crude has fallen from a four-year high of $86 a barrel in early October to $66 on Wednesday. Just weeks ago, some trading firms were talking of $100 oil.
The sources, who declined to be identified by name as the talks are confidential, said a cut of 1.4 million bpd - equal to 1.4 percent of world demand - was one option discussed by energy ministers from Saudi Arabia, non-OPEC Russia and other nations in Abu Dhabi on Sunday.
“I believe a cut of 1.4 million bpd is more reasonable than above it or below it,” one of the sources said.
OPEC and a group of non-OPEC nations, led by Russia, have been cooperating to limit oil supply since the start of 2017. They partially unwound their reduction in June after pressure from Trump to lower prices.
The OPEC-led deal got rid of a glut that built up in 2014 as supply from the United States and other countries outside the group soared. OPEC production rose too, after the then Saudi Oil Minister Ali al-Naimi blocked an OPEC curb on supplies to preserve market share.
This time, Saudi Energy Minister Khalid al-Falih has publicly spoken of a need to lower supplies by 1 million bpd, showing price support is trumping market share. OPEC meets on Dec. 6 to set policy for 2019.
A new round of OPEC-led supply cuts in 2019 would further support U.S. shale oil production, potentially repeating the cycle that played out in 2014.
Oil prices LCOc1 rose on Wednesday, after Tuesday’s 6.6 percent drop, the largest one-day loss since July.
GRAPHIC: OPEC+ current crude output vs October 2016 - tmsnrt.rs/2QGxId6
With three weeks to go until the Dec. 6 meeting in Vienna, OPEC and its partners have not settled on a final figure for a new supply cut, the sources said.
One of the three sources said a minimum cut of 1 million bpd was being considered and it could be larger than 1.4 million bpd. Another source, an OPEC delegate, agreed that a larger cut than 1.4 million bpd was possible, depending on the market.
Nigeria and Libya, which are exempt from the current supply limiting accord, could be included in a new agreement, two of the sources familiar with the matter said.
“We are talking about a cut from everyone, including Nigeria and Libya because their production has exceeded the cap in recent months,” one source said.
While Nigeria and Libyan output has risen, another OPEC member Iran is facing lower exports due to U.S. sanctions that started this month. Tehran might not be called upon to deliver a voluntary cut, another of the three sources said.
Iran, which was angered by higher Saudi and Russian production in response to pressure from Trump, will welcome supply cuts by those producers.
OPEC officials were not sure whether Russia will join another round of supply cuts. Russian Energy Minister Alexander Novak said on Wednesday no emergency action was warranted to stem the decline in prices.
“The market is quite volatile today. We remember that the oil price was sharply rising in the same way, now it is going down. We have to look into long-term development, into how the price will be stabilized,” he said in Singapore.
But OPEC officials hope Moscow will come round eventually.
One of the three sources said any cut for Russia could be gradual, citing the example of the 2017 output reduction deal when Moscow delivered its share of the cuts in phases.
“There are a few challenges to the proposal and Russia is one of them,” another source said.
Additional reporting by Ahmad Ghaddar and Vladimir Soldatkin, Editing by Louise Heavens