As Oil Plunges, the Real OPEC Meeting Will Be at Next Week's G20

27 Nov, 2018

For the oil market, it looks like the real OPEC meeting will come a week ahead of schedule.

The cartel is set to meet on Dec. 6 in Vienna, but days earlier the key decision makers are set to gather on the sidelines of the G20 summit in Buenos Aires in a meeting that may well decide the direction of oil prices in 2019.

Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, who lead the world’s two largest oil exporters and have been working together to manage the oil market for the past two years, both plan to be in the Argentinian capital at the end of next week. Just as important will be U.S. President Donald Trump, who’s made his opposition to OPEC a regular theme in his Twitter diplomacy.

"I expect President Trump will be discussing the optimal price range with Crown Prince Mohamed bin Salman and President Putin at the G20," said Bob McNally, president of Washington consultant Rapidan Energy Advisors LLC and a former White House energy official.

"The market is assuming the Saudis won’t be able to cut," said Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London.

The gathering in Buenos Aires comes after a week of near-panic in the oil market. Brent crude, the global benchmark, plunged 6.1 percent to a one-year low of $58.80 a barrel on Friday, down 22 percent this month on growing concerns the world is oversupplied. West Texas Intermediate, the U.S. benchmark, fell close to $50 a barrel.

"We want low oil prices and Saudi Arabia’s really done a good job," Trump said. For the U.S. president, cheap energy equates to a tax cut for the middle class -- key to maintaining a tired-looking economic expansion.

Yet, not everyone in the oil market is convinced that Prince Mohammed will keep the taps open to please Trump. As much as the U.S. president wants low oil prices, the Saudi prince needs higher oil prices to finance social and military spending, as well as the lavish lifestyles of hundreds of princes.

"It remains our view that the Kingdom will adopt a ‘Saudi First’ policy and prioritize its own economic and social welfare above pleasing the American president," said Helima Croft, chief commodities strategist at RBC Capital Markets LLC and a former CIA analyst.

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